CFAM, a large cannabis operator in San Luis Obispo County, was shut down by the local government this week following multiple violations, thwarting of regulations and, according to county officials, a strong likelihood to continue operating in bad faith. In addition to these charges from local officials, CFAM is currently under investigation by the State of California for illegal subletting with a search warrant being served in March.
CFAM is a sobering lesson on the new normal of legalization
The shuttering of CFAM and its operations on Mesa Road should be a sobering reminder to all within the cannabis industry of the high costs of non-compliance. But the costs of non-compliance are going to continue to climb in what is the new normal of legalized cannabis. With the power now entrusted to local and state officials to regulate the legal cannabis industry, it is imperative that companies not only show a good faith effort to obey the letter of the law, but to also go above and beyond by seeking out internal audits with their compliance officer, or by hiring an outside consultancy (like MMLG) to evaluate and audit any potential violations.
CFAM was dinged repeatedly over a number of months for violations ranging from structures lacking proper permitting, to strong odors, to processing and manufacturing of cannabis from an off-site supplier. These are elementary violations for any company’s leadership to be aware of.
But all these offenses are meted out because of legalization. Despite the multitude of growing pains in California in 2018, state and local officials have made it clearer and clearer that they will be seeking out bad actors and uniformed businesses alike in 2019. The potential tax revenues for the state and local municipalities, and the costs of illegal and unregulated operations to legal businesses, are both too high for there to be any other way in a legalized state.
Legalization means accountability
The bottom line is that legalization means accountability. Accountability in the form of compliance, and accountability in the shape of consequences. What’s so frustrating is that we’re all coming from a heretofore “outlaw industry,” one that saw its own accountability.
We talk about it a lot around the water cooler at 1100 Glendon, “How can we get clients to understand the benefits of compliance when they’re still operating in a federally illegal industry?” So many of our peers (and ourselves) remember the old days of clients being fearful for feds busting in their door and of them still doing their day-to-day work with that specter over them. It takes time and an evolution of thought for all of us to see the that with legalization comes accountability.
But as legislative acts such as SAFE and STATES creep through the glacier-paced process of Constitutional law, we assure you that the benefits of compliance will be self-evident. Compliant companies won’t have to operate in cash-only ecosystems, you could have lines of credit/banking loans, the normal stuff that other industries take for granted. But the challenge of bridging that gap or waiting for that day to come remains.
But state and local authorities can smooth out this coming to terms and this waiting game. It is very frustrating for those within the legal boundaries of cannabis to see peers such as CFAM get dinged and shuttered, while unregulated businesses continue to run amuck across the state of California. Yes, we know Governor Newsom has taken some steps towards fighting this problem. But at the same time, it’s very difficult to have patience and to evolve one’s thoughts on compliance and legalization when permanent licenses aren’t being doled out in a timely fashion, or when cities sue to block delivery services.
During the Great Depression, New York City’s mayor, Fiorello LaGuardia, explained to the citizens of the Big Apple that “patience and fortitude” is what they needed to endure the punishing economic downturn. In all earnestness, we implore our colleagues and peers to apply the same through these days of baby steps and incremental progress.