High-Tech: Exploring Reg-Tech for the Cannabis Industry in CA
This week our guest speaker, Chris Cruz, shared his experiences of being the Deputy Chief Intelligence Officer (CIO) of California. While most of his talk provided us an overview of the state’s priorities in modernizing their technology infrastructure, he did dedicate time to discuss the reg-tech (regulatory tech) approach to the burgeoning cannabis industry. More importantly, he spoke as to the urgency in needing to update the technology systems in place to deal with the massive growth of the industry. From a regulatory standpoint, it is important that the government be able to track and trace every ounce of THC to keep in line with the Cole memorandum – a Department of Justice memo that outlines points regarding federal prosecution of marijuana owners in states that have legalized it. (https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf)
I got a chance to engage in deeper conversation with him and Scott Paterson, a senior advisor in the in the CA Department of Technology who was also in attendance. From their standpoint, the state having its eyes on the manufacture and distribution process is “vital to public safety but also for raising government revenue” via taxation of various companies in the supply chain. Here there is an opportunity for digital tracking solutions, database administrators and public health officials to engage in public-private partnerships and create a standardized solution which can track the drug from cultivation to retail stages. This would ease public health concerns and make auditing these institutions easier.
From my research, there are a few companies in this space. The most promising is called Bio-Track (https://www.biotrack.com/cannabis-software/). It brands itself as an “All-In-One Compliance-Focused Seed-to-Sale Tracking and Comprehensive Cannabis Software.” Not only can they conduct yield forecasting and monitor harvest data, the software tracks transport manifests for all derivable products from THC till the point of sale. They also promise data security and guaranteed uptime through their FedRAMP certification which is the data security clearance required by all sensitive government systems. This results in accurate information storage and retrieval for all stakeholders involved, keeping companies happy by providing powerful analytics and ensuring transparency and compliance with state and federal laws. Additionally, these systems are versatile enough to support the regulatory framework of “commercial cannabis activity” that the state legislature would like to implement in 2018. (http://www.calgrowersassociation.org/licenses)
All in all, it seems that Mr. Cruz was right in describing the vastness of opportunity in reg-tech and of California’s overwhelming commitment to use smart data driven solutions to unique problems of the next century. The only short-coming I can see from the proposals he spoke about and my own research is the unpredictability of the current Presidential administration which could play a factor as the cannabis industry matures nationwide. It also remains to be seen whether growth of demand for such items is sustainable or has peaked past the initial excitement. Yet, for now it appears that things are going full steam ahead in this new high-tech industry (mind the pun) with plenty of big-data and cloud applications hoping to make these businesses operate more efficiently.
Open to further this discussion on this and any other topic from the lecture. Leave your comments or write to me – farhanf@stanford.edu
— Farhan Farooqui
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4 comments on “High-Tech: Exploring Reg-Tech for the Cannabis Industry in CA”
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Hello Farhan,
I was also very interested in this sub-topic of Chris’ lecture this week. Some states that have legalized Marijuana have over a billion dollars in sales from Marijuana, and it is vital track and tax this new revenue. In fact, I was able to access various sets of data about Marijuana sales, which is a testament to the current technology being used to track this data in other states. California is a huge state, so I expect there to be even more data which gives various challenges including storage, collection, and data processing.
You also brought up the potential challenges from the federal government, especially with the Trump administration. I believe tracking the data would not be inhibited by the federal government, but it is possible this data can be used against the state and dispensaries since it would most likely be readily available for anyone to view, especially since Chris mentioned high value data sets should be published to utilize tech to serve Californians.
Great post!
Hello Farhan,
Good points! I also talked with Chris after his talk and I could feel the same the unpredictability of the current Presidential administration, not only in the cannabis industry, but also in the research on climate change, energy, smart cities, and so on. However, Chris is optimistic and believes that the government of California will be more proactive to support related data-driven fields to thrive. What do you think? Based on your research experience, is it possible for the state governments lead the development of data-driven industries?
Yi-Lin Tsai
Software used to track the entire supply chain would be a great solution to expand the legalization of cannabis across the states. I believe the main issue is transparency across the whole chain. There is also the aspect of tax revenue which Ajit pointed out. How can you create taxes that do not Regarding your statement about an increase in demand, I believe their will be. Now, whether it is consumed in the U.S. that’s another story. Take Netherlands for example. The revenue generated by drugs in Netherlands is 0.4 percent of gross domestic product. Half of the consumption is domestic and the other half is from exports according to Statistics Netherlands. Drug tourism is another source of revenue in North Holland. 22% of tourists that visit Amsterdam have visited a coffee shop, according to a research from 2012. Software needs to become an important part of this industry if it is to be adopted nationwide in the U.S. due to the high margins of profit it could generate in a country that has this population.
Hi Fahran !
Very nice post, your thoughts are interesting because they help guessing what will the future cannabis industry look like. And I do believe that a good usage of data is the key to monitor this supply chain which involves many actors.
In addition, I am convinced that the presidential administration will not be a hindrance to the flourishing cannabis industry. Considering the huge advancements being made (nine states in favor of recreational use, including California) a step backward seems unlikely, and the wave of the cannabis industry will certainly spread on the rest of the country in the upcoming years.