ACS Laboratory, a cannabis and hemp testing lab based outside of Tampa Bay, Florida, announced the launch of their “Tested Safe Certified Seal” program. The program is designed to help raise standards and put more consumer trust in safe, tested products.
ACS Laboratory is an ISO 17025-accredited and DEA-licensed cannabis testing company founded in 2008. Last year they were certified by the Florida Department of Health to perform cannabis testing for state-licensed cannabis companies. In addition, the company acquired Botanica Testing, Inc. in 2020, adding more than 500 hemp and CBD clients to their portfolio. They now perform hemp testing for clients in more than 44 states.
The “Tested Safe Certified Seal” program allows companies to adorn their products with the trademarked seal following testing, informing consumers that their product has met safety standards and a full panel of compliance tests. “Unlike a mandated QR code that links to a Certificate of Analysis (COA) with detailed test results, the Seal shows visual proof at a glance that consumers can trust a brand,” reads the press release.
The program is also endorsed by the American Cannabinoid Association (ACA). “It is exciting to see our industry legally providing cannabis and cannabis-derived products on a commercial scale,” says Matthew Guenther, founder of the ACA. “As with any consumer product, safety and quality control remain our absolute priority.”
To earn the seal, companies send their products to the ACS lab for a full panel of safety and potency tests. ACS has a scope of services that includes: potency testing for 21 cannabinoids, 38 terpene profiles, 42 residual solvents, screening for 105 pesticides, moisture content, water activity, microbiology panels, heavy metals screening, flavonoid testing for 16 profiles, micronutrient testing, mycotoxins, Vitamin E acetate, shelf life & stability, plant regulators (PGRS), PAH testing and Pharmacokinetic Studies (PK) aka human trials.
Cannabis is still federally illegal and is included on Schedule 1 of the Controlled Substances Act (CSA), along with such other substances as heroin, fentanyl and methamphetamines.1 It is a federal crime to grow, possess or sell cannabis.
Despite being federally illegal, 36 U.S. states and the District of Columbia have legalized the sale and use of cannabis for medical and/or adult use purposes,2 and both direct and indirect cannabis-related businesses (CRBs) are growing at a rapid rate. Revenue from medical and adult use cannabis sales in the US in 2019 is estimated to have reached $10.6B-$13B and is on track to reach nearly $37B in 2024.3
Because the sale of cannabis is federally illegal, financial institutions face a dilemma when deciding to provide services to CRBs. Should they take a significant legal risk or stay out of the market and miss out on a significant revenue opportunity? So far, the vast majority of financial institutions have been unwilling to take the risk, resulting in a dearth of options for CRB’s. Until recently, cannabis business operators had few options for financial services, but times are changing.
This piece will discuss current trends in banking for cannabis-related businesses. We will cover differences in legality at state and federal levels, complexities in dealing in cash versus digital currencies, Congressional actions impacting banking and CRBs and how banking is changing. The explosion of state legalization of cannabis over the past several years has had a strong ripple effect across the US economy, touching many industries both directly and indirectly. Understanding the implications of doing business with a CRB is both challenging and necessary.
Feds Versus States
Money laundering is the process used to conceal the existence, illegal source or illegal application of funds.4 In 1986 Congress enacted the Money Laundering Control Act (MLCA), which makes it a federal crime to engage in certain financial and monetary transactions with the proceeds of “specified unlawful activity.”5 Therefore, CRB transactions are technically illegal transactions under the MLCA.
Financial institutions therefore face a risk of violating the MLCA if they choose to do business with CRBs, even in states where cannabis operations are permitted. In addition, financial institutions could also face criminal liability under the Bank Secrecy Act (BSA) for failing to identify or report financial transactions that involve the proceeds of cannabis businesses operating legally under state law.6
In short, because cannabis is illegal at the federal level, processing funds derived from CRBs could be considered aiding and abetting criminal activity or money laundering. States, however, began legalizing cannabis in 1996, and by 2009, thirteen states had laws allowing cannabis possession and use.7 Despite this legislation, federal authorities continued to aggressively enforce federal cannabis laws.8 That changed under the Obama administration when, shortly after being elected, President Obama stated that his administration would not target legal CRB’s who were abiding by state laws. In an attempt to provide clarity in this murky environment, beginning in 2009, the Department of Justice (DOJ) issued three memos designed to guide federal prosecutors in this area. However, none of the DOJ memos issued from 2009 through 2013 addressed potential financial crime related to the legal sale or distribution of cannabis in states allowing the use of medicinal or recreational cannabis.
To assist financial institutions in navigating potential financial crime implications of banking CRBs, the Financial Crimes Enforcement Network (FinCen) issued guidance in 2014 that clarified how financial institutions could conduct business with CRBs and maintain compliance with their Bank Secrecy Act requirements (2014 Guidance).9 According to the 2014 Guidance, financial institutions may choose to interact with CRBs based on factors specific to each institution, including the institution’s business objectives, the evaluated risks associated with offering such services, and its ability to manage those risks effectively.
The 2014 Guidance requires those who choose to provide services to CRBs to design and implement a thorough customer due diligence review that includes, in part, analyzing the licensing of the entity, developing an understanding of the business operations of the entity, and ongoing monitoring of the entity.9 In addition, financial institutions are required to file a Suspicious Activity Report (SAR) for every transaction they process for a CRB, should they choose to accept the business.
Although the 2014 Guidance does outline a path for financial institutions to engage with CRBs, it does not change federal law and, therefore, does not eliminate the legal risk to financial institutions.10 By its very nature, the 2014 Guidance was a temporary fix, subject to changing views of different administrations, evidenced by the fact that all three of the DOJ guidance documents noted above were rescinded by then Attorney General Jeff Sessions on January 4, 2018.12 The DOJ enforcement posture could change once again in a Biden administration. Biden is on record as favoring decriminalization, and Attorney General candidate Merrick Garland has stated that if confirmed he will deprioritize enforcement of low-level cannabis crimes. Garland also believes using limited government resources to pursue prosecution of cannabis crimes states where cannabis is legal does not make sense.12
Because of the uncertainty and high risk, most banks remain unwilling to serve CRBs. Those that do serve CRBs charge exorbitant fees (fees of $750-$1,000 or more per account per month are not uncommon), pricing many smaller operators out of the financial services market.
Cash is King – Or Is It?
Cannabis operators have discovered the old adage “cash is king” is not necessarily true when it comes to the cannabis space. Bank-less CRBs are forced to utilize cash to pay business expenses, which can be particularly difficult. Utility companies, payroll companies, and taxing authorities are just some of the providers that are difficult, if not impossible, to pay in cash. For example, cannabis operators have been turned away from IRS offices when attempting to pay large federal tax obligations in cash. Likewise, cannabis operators have been unable to utilize payroll processing companies to administer payroll and benefits for their businesses because the processors won’t take cash. CRBs can’t use Amazon or other online retailers because online providers cannot accept cash.
Because dealing in cash is so difficult, CRB operators look for workarounds such as using personal credit/debit cards to purchase business equipment and supplies. This doesn’t eliminate the cash problem, however, because the credit card holder will likely have to accept cash as reimbursement. Such transactions could be considered an attempt to hide the source of the cash, which is, by definition, money laundering.
Some bank-less CRBs try to skirt the system by obtaining bank accounts in the name of management companies or other entities one step removed from the actual business. While operators often choose this route in an effort to streamline business and operate out of the shadows, it again runs afoul of banking laws. Transferring cannabis related financial transactions to another entity is actually the very definition of money laundering – which, as noted above, is defined as the process used to conceal the existence or source of “illegal” funds.
In addition to the difficulties in making payments or purchasing business supplies, operating in a cash-heavy environment poses significant safety risks for cannabis operators. CRBs often have large sums of money onsite and transport large sums of cash when purchasing product or paying bills, making them a target for robbery. In 2017, there was a spate of dispensary robberies across the Phoenix Metro area, including one at Bloom Dispensary that took place during operating hours.13
Managing all that cash increases the cost of doing business as well, in the form of increased labor, insurance, and security costs. Cash must be counted and double counted, which can be time consuming for staff, not to mention the time it takes to deliver physical cash payments to hither and yon. Ironically, lack of banking significantly decreases transparency and clouds the waters of compliance, as operating strictly in cash makes it easier to manipulate reported financial results.
Potential Congressional Solutions
In recent years Congress has undertaken several efforts to pass legislation designed to address the state/federal divide on cannabis, which would likely clear the way for financial institutions to provide services to CRBs, including:
R. 1595 – Secure and Fair Enforcement Banking Act of 2019 (“SAFE Act”);
1028 & H.R. 2093 – Strengthening the Tenth Amendment Through Entrusting States Act (STATES Act); and
2227 – Marijuana Opportunity Reinvestment and Expungement Act of 2019 (MORE Act).
The climate in Washington DC, however, did not allow any of these initiatives to pass both houses of congress. Had any been sent to the White House, President Trump was unlikely to sign them into law.
The cannabis industry has new reason to believe reform is on the horizon with shift in political leadership in the White House and Senate. Newly anointed Senate Majority Leader Chuck Schumer recently committed to making federal cannabis reform a priority, and President Biden appears committed to decriminalization, reviving the hope of passage of one of these pieces of legislation.
The Changing Banking Landscape
Even though there is little in the way of formal protections for financial institutions, and with the timeline for a legislative fix unknown, an increasing number of banks are working with cannabis operators.
According to FinCen statistics, there were approximately 695 financial institutions actively involved with CRBs as of June 30, 2020. It is important to note that these statistics are based on SAR filings, which banks are required to file when an account or transaction is suspected of being affiliated with a cannabis business. However, some of these SARs may have been generated on genuine suspicious activity rather than on a transaction with a known cannabis customer.
There are arguably more banking institutions offering services to CRBs than ever before. The challenges for CRBs are (1) finding an institution that is willing to offer services; (2) building/maintaining a compliance regime that will be acceptable to that institution; and (3) cost, given the high fees associated with these types of accounts.
How CRBs Get Accepted by Banks
The gap between CRBs’ need for banking and the financial services providers’ sparse and expensive offerings to the sector has created an opportunity for third-party firms to intervene and provide a compliance structure that will satisfy the needs of the financial institutions, making it easier for the CRB to find a bank.
These third-party firms perform extensive BSA-compliant due diligence on applicants to ensure potential customers are following FinCen guidance required to receive banking services. After the completion of due diligence, they connect the CRBs with financial institutions that are willing to do business with CRBs and provide checking/savings accounts, check writing capability, and merchant processor accounts. These firms often provide additional services such as armored car and cash vaulting services. Some of these firms also offer vendor screening, pre-approving vendors before any payments can be made.
One such firm, Safe Harbor Private Banking, started as a project implemented by the CEO of Partners Credit Union in Denver, Colorado, who set out to design a cannabis banking program that would allow Partners to do business with Colorado CRBs.15 The program was successful and has since expanded into other states who have legalized cannabis. Other operators include Dama Financial and NaturePay.
While these services offer hope for many CRBs, the downside is cost. These services perform the operations necessary to find, open, and maintain a compliant bank account; however, the costs of compliance are still high, pricing some small operators out of the market.
Is Digital Currency an Answer?
Digital currency is also making its way into the cannabis world. Digital currency, or cryptocurrency, is a medium of exchange that utilizes a decentralized ledger to record transactions, otherwise known as a blockchain. One of the largest benefits of blockchain is that it is a secure, incorruptible digital ledger used for, among other things, financial transactions.16 Blockchain technology offers CRBs a transparent and immutable audit trail for business and financial transactions. Several cannabis-specific cryptocurrencies have sprung up in the past several years, including PotCoin, CannabisCoin, and DopeCoin, to name a few.
In July 2019, Arizona approved cryptocurrency startup ALTA to offer services to the state’s medical cannabis operators.17 ALTA describes itself as a “digital payment club where cash-intensive businesses pay each other using digital tokens instead of cash.”18 ALTA members purchase digital tokens that are used to pay other members using a proprietary blockchain based system. The tokens are redeemable for US dollars at a stable rate of 1:1, and CRBs do not need a bank account to participate in the ALTA program.
ALTA proposes to pick up members’ cash and exchanges it for tokens, which are then used to pay other members for goods and services. Tokens may be redeemed for cash at any time.18 The company has been approved by the Arizona State Attorney General, and one of the first members they hope to enlist is the Arizona Department of Revenue (ADOR). Enlisting ADOR into the program would allow dispensary members to pay state taxes digitally rather than hauling large amounts of cash to ADOR offices.
Similarly, Nevada recently contracted with Multichain Ventures to supply a digital currency solution to the Nevada cannabis industry. Nevada Assembly Bill 466 requires the state create a pilot program to design a “closed loop” system like Venmo in an effort to reduce cash transactions in the cannabis sector. Like ALTA, Nevada’s proposed system will convert cash to tokens which can then be transacted between system participants.19
While both proposals are promising for Arizona and Nevada CRBs, the timeline as to when, or if, these offerings will come online is unknown. Action on cannabis reform at the federal level may render these options moot.
Looking to the Future
Although states are legalizing cannabis in one form or another in growing numbers, the fact that cannabis is still federally illegal poses a significant barrier to accessing the financial services market for CRBs. While most banks are still reluctant to offer services to this rapidly growing industry, there are more banks than ever before willing to participate in the cannabis industry. Recent changes in leadership in Washington DC offer a positive outlook for cannabis reform at the federal level.
As the “green rush” continues to envelop the country, financial services options available to CRBs are slowly growing. Many new options are now available to help CRBs find a bank, develop compliance programs, and manage the cash related problems encountered by most CRBs. However, these solutions may be out of reach for the budget-conscious small operator. Also, there are a number of cryptocurrency solutions designed specifically for CRBs; however, when, or if, these solutions will gain significant traction is still unknown.
Controlled Substances Act, 21 U.S.C., Subchapter I, Part B, §812.
“State Marijuana Laws”; National Conference of State Legislatures, February 19, 2021.
“Exclusive: US Retail Marijuana Sales On Pace to Rise 40% in 2020, near $37B by 2024”. Marijuana Business Daily, June 30, 2020.
Kaufman, Irving. “The Cash Connection: Organized Crime, Financial Institutions, and Money Laundering”. Interim Report to the President, October 1984.
S. Code § 1956 – Laundering of Monetary Instruments.
Rowe, Robert. “Compliance and the Cannabis Conundrum.” ABA Banking Journal, September 11, 2016.
“History of Marijuana as a Medicine – 2900 BC to Present”. ProCon.org, December 4, 2020.
Truble, Sarah and Kasai, Nathan. “The Past – and Future – of Federal Marijuana Enforcement”. org, May 12, 2017.
The legalization of cannabis in the U.S. has been long in the making. Back in the early 1970s, states such as Oregon, Texas and Colorado began the process of decriminalizing small amounts of cannabis. Fast forward 50 years or thereabouts, and the momentum toward legalization is undeniable.
True, cannabis remains illegal at the federal level, but state after state is legalizing the substance for medical and adult use. California was the first to do so for medical usage in 1996. Since then, several others have jumped on the medical cannabis bandwagon, and a total of 19 states have legalized cannabis for adult use. It seems, then, that it’s just a matter of time before the federal government follows suit.
A Bit of Background
There are two key federal laws concerning cannabis that criminalize its use: the Comprehensive Drug Abuse Prevention and Control Act (CDAPCA) and the Controlled Substances Act (CSA), which is part of the CDAPCA. The CSA became effective in 1971 and grouped cannabis along with heroin, LSD and cocaine as Schedule I drugs that are tightly regulated and deemed illegal by the federal government. For its part, the CDAPCA, also enacted in the 70s, was an element of the U.S. “War on Drugs,” and served to significantly restrict manufacturing and distribution of cannabis, among other substances, and amp up related security laws.
Times have certainly changed over the decades, and so has public sentiment about cannabis use. In fact, over 91% of U.S. adults say that cannabis should be legal for adult use or medical use—this according to the Pew Research Center. Clearly, more and more states are hearing this message loud and clear given the uptick in jurisdictions legalizing the substance, be it for medical or adult use purposes.
The Booming Legal Cannabis Market
The legal cannabis business is on fire, with recent estimates suggesting that the size of the global market will climb to $84 billion by 2028. This is a staggering number that spells opportunity for budding (pun intended) entrepreneurs in the U.S. and beyond, not to mention tax authorities. It gets even better when taking into account the popularity of CBD products. CBD, which is derived from the cannabis plant but does not contain THC and is legal in the U.S., has become an integral part of the wellness industry. Experts predict that the global CBD market is on its way to reaching a value of $55 billion in years to come.
What This All Means for the Future of Cannabis at the Federal Level
No doubt about it, legal cannabis is big business. But that business is being thwarted by the failure of the federal government to change course and legalize the substance. With cannabis still considered a Schedule I drug, federal banks are unable to provide access to financial services for companies selling cannabis-related products. As otherwise stated, because federal law makes cannabis illegal, banks cannot do business with cannabis companies, which is problematic for so many reasons.
But good news could be on the horizon. The SAFE Banking Act of 2021, which would provide a safe harbor for banking institutions providing services to cannabis clients, was passed in the U.S. House of Representatives and referred to committee. Whether the legislation passes in its current form is anyone’s guess, though our federal legislature does seem to be nearing the relaxation of existing cannabis restrictions.
This is evidenced as well in the U.S. Senate, where the Cannabis Administration and Opportunity Act was recently introduced and is currently pending. That legislation would, among other things, remove cannabis from the CSA, introduce regulations to tax cannabis products, expunge prior convictions, and maintain the authority of states to set their own cannabis policies.
Of course, there’s no certainty that 2021 will be the year when cannabis is finally legalized (or at the very least, decriminalized) federally. Still, we’re closer to that eventuality than ever before.
The NIST is an organization under the U.S. Department of Commerce that promotes innovation through standards, technology and advancing science. The NIST’s CannaQAP platform works with cannabis labs to help improve competence in analytical science and standardization.
The program requires participating labs to conduct exercises that help inform the NIST about current industry standards and capabilities for hemp and cannabis testing. One of the goals of the program is aiding in the design and characterization of cannabis reference materials.
Kaycha Labs took part in two exercises for the CannaQAP study. Exercise 1 included testing for potency with 17 cannabinoids in hemp oil and Exercise 2 included potency, heavy metals and moisture content testing in plant materials.
Chris Martinez, president of Kaycha Labs, says the program can benefit the entire industry when it comes to regulatory compliance testing. “As a leading cannabis lab company with a network of labs in multiple states, it is imperative we demonstrate that our labs apply compliant and consistent testing methodologies,” says Martinez. “Assuring all industry participants, including State and Federal government regulators, that precise and consistent testing data is the norm will benefit the entire industry.”
Kaycha Labs, while based in Fort Lauderdale, actually has cannabis testing labs in California, Colorado, Florida, Massachusetts, Nevada, Oklahoma, Oregon and Tennessee, making them an ideal candidate for CannaQAP.
Exercise 1 has been completed in its entirety and published here. Exercise 2 has completed the participation and data submission legs of the study and NIST is preparing it for publication. On their website, it says that announcements about their upcoming Exercise 3 are coming soon.
Change control, when it comes to quality management systems in manufacturing, processing and producing products such as cannabis edibles or vape pens, is a process where changes to a product or production line are introduced in a controlled and coordinated manner. The purpose of change control process management is to reduce the possibility of unneeded changes disrupting a system, introducing errors or increasing costs unnecessarily.
ASTM International, the international standards development organization, is developing a new standard guide that will cover change control process management for the cannabis and hemp market. The guide is being developed through the D37 cannabis committee.
The WK77590 guide will establish a standardized method for change control process management for cannabis companies so that they can document and track important decisions in manufacturing and quality systems.
For example, an edibles manufacturer would utilize change control process management if they want to use a different type of processing equipment or introduce a new shape or design of their product. Without change control process management, that edibles producer might switch to a new piece of processing equipment without knowing that it requires more energy or uses different raw materials, thus making production unexpectedly more expensive.
While that’s a very cursory example, the premise is simple: Before you undergo a change to your process, plan it out, analyze it, review it, test it out, implement it and make sure it works.
Change control process management can often be summarized in six steps:
Maribel Colón, quality assurance consultant and vice chair of the ASTM subcommittee on cannabis quality management systems, says producers and testing labs will benefit the most from the guide. “As the cannabis industry grows, the quality, expectations, and control challenges grow within,” says Colón. “The creation and implementation of this standard guide will increase cannabis business efficiency and minimize risk, time, and potential cost of poorly managed changes.”
According to a press release, ASTM International is open to collaboration on this as well. Specifically, they are looking for professionals with change control who might be interested in helping advance and develop this guide.
On August 11, PathogenDx announced that they received an AOAC Performance Tested Methods Certificate for their QuantX total yeast and mold test. Six days later, on August 17, Medicinal Genomics announced that AOAC approved their PathoSEEK 5-Color Aspergillus Multiplex Assays under the same AOAC Performance Tested Methods program.
Both assays are specifically designed with cannabis and hemp testing in mind and designed to expedite and simplify microbiological testing. PathogenDx’s QuantX quantifies the total amount of yeast and mold in a sample while also measuring against safety standards.
In addition to the total yeast and mold count test, PathogenDx has also introduced a 96-well plate, improved sample preparation and new data reporting with a custom reporting portal for compliance testing.
The Medicinal Genomics platform can detect four species, including A. flavus, A. fumigatus, A. niger, and A. terreus in both flower and infused edibles. The PathoSEEK microbial testing platform uses a PCR-based assay and provides an internal plant DNA control for every reaction.
This technique verifies the performance of the assay when detecting pathogens, allegedly minimizing false negative results commonly due to set up errors and experimental conditions.
AOAC International is a standards organization that works in the cannabis testing space through their CASP program to evaluate and approve standard testing methods for the industry.
Cross Contamination – noun – “inadvertent transfer of bacteria or other contaminants from one surface, substance, etc., to another especially because of unsanitary handling procedures. – (Mariam Webster, 2021). Cross contamination is not a new concept in the clinical and food lab industries; many facilities have significant design aspects as well as SOPs to deliver the least amount of contaminants into the lab setting. For cannabis labs, however, often the exponential growth leads to a circumstance where the lab simply isn’t large enough for the number of samples processed and number of analytical instruments and personnel needed to process them. Cross contamination for cannabis labs can mean delayed results, heightened occurrences of false positives, and ultimately lost customers – why would you pay for analysis of your clean product in a dirty facility? The following steps can save you the headaches associated with cross contamination:
Wash (and dry) your hands properly
Flash back to early pandemic times when the Tik Tok “Ghen Co Vy” hand washing song was the hotness – we had little to no idea that the disease would be fueled mostly by aerosol transmission, but the premise is the same, good hand hygiene is good to reduce cross contamination. Hands are often the source of bacteria, both resident (here for the long haul; attached to your hands) and transient (easy to remove; just passing through), as they come into contact with surfaces from the bathroom to the pipettor daily (Robinson et al, 2016). Glove use coupled with adequate hand washing are good practices to reduce cross contamination from personnel to a product sample. Additionally, the type of hand drying technique can reduce the microbial load on the bathroom floors and, subsequently tracked into the lab. A 2013 study demonstrated almost double the contamination from air blade technology versus using a paper towel to dry your hands (Margas et al, 2013).
Design Your Lab for Separation
Microbes are migratory. In fact, E. coli can travel at speeds up to 15 body lengths per second. Compared to the fastest Olympians running the 4X100m relay, with an average speed of 35 feet per second or 6 body lengths, this bacterium is a gold medal winner, but we don’t want that in the lab setting (Milo and Phillips, 2021). New lab design keeps this idea of bacterial travel in mind, but for those labs without a new build, steps can be made to prevent contamination:
Try to keep traffic flow moving in one direction. Retracing steps can lead to contamination of a previous work station
Use separate equipment (e.g. cabinets, pipettes) for each process/step
Separate pre- and post-pcr areas
Physical separation – use different rooms, add walls, partitions, etc.
Establish, Train and Adhere to SOPs
High turnover for personnel in labs causes myriad issues. It doesn’t take long for a lab that is buttoned up with cohesive workflows to become a willy-nilly hodgepodge of poor lab practices. A lack of codified Standard Operating Procedures (SOPs) can lead to a lab rife with contaminants and no clear way to troubleshoot the issue. Labs should design strict SOPs that include everything from hand hygiene to test procedures and sanitation. Written SOPs, according to the WHO, should be available at all work stations in their most recent version in order to reduce biased results from testing (WHO, 2009). These SOPs should be relayed to each new employee and training on updated SOPs should be conducted on an ongoing basis. According to Sutton, 2010, laboratory SOPs can be broken down into the following categories:
Establish Controls and Monitor Results
It may be difficult for labs to keep tabs on positivity and fail rates, but these are important aspects of a QC regimen. For microbiological analysis, labs should use an internal positive control to validate that 1) the method is working properly and 2) positives are a result of target analytes found in the target matrix, not an internal lab contamination strain. Positive controls can be an organism of choice, such as Salmonella Tranoroa, and can be tagged with a marker, such as Green Fluorescent Protein in order to differentiate the control strain. These controls will allow a lab tech to discriminate between a naturally contaminated specimen vs. a positive as a result of cross-contamination.
Labs should, in addition to having good QC practices, keep track of fail rates and positivity rates. This can be done as total lab results by analysis, but also can be broken down into customers. For instance, a lab fail rate for pesticides averages 4% for dried flower samples. If, during a given period of review, this rate jumps past 6% or falls below 2%, their may be an issue with instrumentation, personnel or the product itself. Once contamination is ruled out, labs can then present evidence of spikes in fail rates to growers who can then remediate in their own facilities. These efforts in concert will inherently drive down fail rates, increase lab capacity and efficiency, and result in cost savings for all parties associated.
Continuous Improvement is the Key
Cannabis testing labs are, compared to their food and clinical counterparts, relatively new. The lack of consistent state and federal regulation coupled with unfathomable growth each year, means many labs have been in the “build the plane as you fly” mode. As the lab environment matures, simple QC, SOP and hygiene changes can make an incremental differences and drive improvements for labs as well as growers and manufacturers they support. Lab management can, and should, take steps to reduce cross contamination, increase efficiency and lower costs; The first step is always the hardest, but continuous improvement cannot begin until it has been taken.
Margas, E, Maguire, E, Berland, C. R, Welander, F, & Holah, J. T. (2013). Assessment of the environmental microbiological cross contamination following hand drying with paper hand towels or an air blade dryer. Journal of Applied Microbiology, 115(2), 572-582.
Milo, M., and Phillips, R. (2021). How fast do cells move? Cell biology by the numbers. Retrieved from http://book.bionumbers.org/how-fast-do-cells-move/
Robinson, Andrew L, Lee, Hyun Jung, Kwon, Junehee, Todd, Ewen, Perez Rodriguez, Fernando, & Ryu, Dojin. (2016). Adequate Hand Washing and Glove Use Are Necessary To Reduce Cross-Contamination from Hands with High Bacterial Loads. Journal of Food Protection, 79(2), 304–308. https://doi.org/10.4315/0362-028X.JFP-15-342
Sutton, Scott. (2010). The importance of a strong SOP system in the QC microbiology lab. Journal of GXP Compliance, 14(2), 44.
World Health Organization. (2009). Good Laboratory Practice Handbook. Retrieved from https://www.who.int/tdr/publications/documents/glp-handbook.pdf
As the legalization of cannabis in the U.S. continues to grow, stringent regulatory requirements around the country are being adopted to ensure that only safe and high-quality cannabis is sold. The U.S. cannabis testing market is estimated to see tremendous growth over the coming years. Further, the FDA has made several resources available for addressing cannabis products like CBD to ensure that consumers and stakeholders are getting safe products.
Prominent players operating in the U.S. cannabis testing market such as CannaSafe, Anresco, Collective Wellness of California, EVIO Inc., Digipath Inc., PSI Labs, SC Labs, Inc., Steep Hill, Inc. etc. are focusing on developing enhanced cannabis testing solutions and accreditation for gaining strong market presence. For example, earlier this year SC Labs developed a comprehensive hemp testing panel that is purported to meet testing standards in every state with a hemp program.
Citing another instance, in 2019, a leading cannabis resource Leafly, introduced the Leafly Certified Labs Program, under which a network of labs is independently assessed by Leafly for quality and accuracy. This program has been designed to address inconsistency in cannabis testing by ensuring that lab data comes from labs that have been confirmed to provide accurate results.
Rising adoption of high-pressure liquid chromatography (HPLC) technique
A lot of cannabis testing procedures are carried out using liquid chromatography. It is estimated to witness higher preference over the coming years. In 2020, the liquid chromatography segment recorded a valuation of USD 662.4 million. Further, liquid chromatography is a valuable alternative to gas chromatography when it comes to analysis of cannabinoids, pesticides and THC which is why this technology is often preferred for potency testing as it offers more precise analysis. Moreover, purification standards are highly controlled in liquid chromatography which helps in obtaining accurate results, which is complementing the segment growth.
Growing popularity of heavy metals testing for cannabis
Heavy metals are known to be one of the major contaminants found in cannabis and its products apart from residual solvents, microbial organisms and pesticides. In addition, heavy metals are highly toxic in nature and on exposure can lead to poisoning and other complications. As a result, heavy metal testing for cannabis and its products is increasingly becoming popular. Several government organizations have made heavy metal testing mandatory for cannabis products. Moreover, increasing legalization of cannabis across several countries for adult use and medical purposes is likely to instigate the demand for heavy metal testing of cannabis products, thereby fostering the growth of heavy metals testing segment over the coming years. For the record, in 2020, the segment had recorded a market revenue of USD 352.5 million.
Increasing support from government bodies in the Mountain West
With increasing legalization for medical and adult use, the cannabis testing market in the Mountain West zone of the U.S. is likely to observe a tremendous growth over time. Moreover, growing support from various government bodies is playing a key role in enhancing the business space. For example, Montana’s Department of Revenue helps labs get licensed along with the state’s environmental laboratory that oversees inspections and licensing. Further, presence of a large number of cultivators of cannabis and manufacturers of cannabis-based products are also positively influencing the regional market growth. Considering the significance of these growth factors, the U.S. cannabis testing market in the Mountain West is estimated to register a substantial CAGR of 9.6% through 2027.
As sales of Delta 8 increase, hemp and cannabis industry infighting increases right along with it. Some hemp leaders say they object to Delta 8 simply because it’s intoxicating: “Hemp is nourishing….hemp is not intoxicating,” the president of the U.S. Hemp Authority President told Hemp Grower (apparently cannabinoids can only be one or the other). Others claim that Delta 8 itself is unsafe: “Very little is known about the health effects of Delta 8,” warned the media relations director for the National Cannabis Industry Association. The U.S. Cannabis Council called Delta 8’s growing popularity “a rapidly expanding crisis” in a report that includes the heading “The Health Risks of Delta-8 THC” and claims Delta 8 “presents a public health risk of potentially wider impact than the vape crisis.”
As a cannabis and hemp industry veteran and a long-time maker of numerous hemp-derived formulations (including Delta 8 products) I have to ask: who exactly is Delta 8 a crisis for, and why? I agree that we need to address the legitimate issues with Delta 8 manufacturing and create regulatory oversight that ensures consumer safety. But some Delta 8 critics may be more concerned with their own bottom line than with protecting public health. No one wants another vaping crisis, but demonizing a newly popular cannabinoid or trying to get it banned doesn’t solve the problem of an unregulated space—and it won’t end the demand for Delta 8, either.
John Kagia of New Frontier Data points out that the Delta 8 boom is “a phenomenon that has taken the industry quite by storm”—and while that storm’s rising tide saved many hemp farmers from financial ruin, it has not lifted every boat. Some cannabis leaders consider Delta 8 an incursion into “their” market. Indeed, Delta 8 can be sold in some states where cannabis remains illegal: “Unregulated Delta 8 risks becoming a competitive threat to [cannabis companies’] existing offerings, sold in states they can’t get into,” reported Tiffany Kary at the Chicago Tribune. But the threat here for cannabis operators isn’t Delta 8: it’s Prohibition. In states where cannabis is illegal, Delta 8 (which is remarkably similar in molecular structure to its federally illegal chemical cousin Delta 9) is being purchased as an alternative. Rather than villainizing a cannabinoid, let’s address retrograde, reactionary state legislatures that refuse to listen to the will of their constituents, and outdated federal laws that equate THC with heroin.
Many see Delta 8 as a threat to the licensed cannabis industry’s profit margins, not only because it can be sold in prohibition states, but because its unregulated status makes it far easier and cheaper to make and sell. Cannabis companies have to navigate an overwhelming and burdensome maze of regulatory red tape to maintain compliance, so industry-wide frustration with the total lack of oversight for Delta 8 is both understandable and justified. But calling for statewide bans on a product that competes with yours is not the solution. That’s not how markets work. (Of all people, cannabis industry professionals should know that banning cannabinoids doesn’t make them go away.) Regulating Delta 8 manufacturers and requiring rigorous product testing are reality-based measures that will make the playing field fairer for cannabis while also safeguarding public health. In the meantime, we can strongly encourage Delta 8 consumers to seek out products made by ethical operators that are transparent about their manufacturing process and provide third-party testing results—the exact same protocol we recommend for buying CBD.
The safety of Delta 8 products is another legitimate concern that’s unfortunately been distorted. Some alarmist headlines seem to equate the actual cannabinoid itself with hazardous material. One East Coast CBD manufacturer issued a press release announcing “a warning for consumers and manufacturers about potentially harmful chemicals within Delta 8 THC” with the cable-newsworthy headline “Dangerous Delta 8?” Smearing Delta 8 as an inherent health menace is both misleading and unhelpful. As Rick Trojan, vice president of the board of directors of the Hemp Industries Association points out, “Cannabinoids themselves have never in the history of humanity caused a death by themselves.” Once again, the problem here isn’t the actual cannabinoid: it’s the lack of regulation that allows Delta 8 products to be produced with no oversight or testing. But given Delta 8’s widespread popularity, short-sighted bans like the ones that have been passed in 17 different states will only increase the risk to public health. Retailers nationwide sold at least $10 million worth of Delta 8 products last year. I guarantee that demand will continue, and that these bans will simply empower an illegal market full of bad actors.
Finally, I remain shocked at the contempt aimed at Delta 8 because it’s psychoactive, and at those who consume it for just “wanting a cheap high.” As with all cannabinoids, we need more clinical research into Delta 8’s properties—but the research we do have indicates that Delta 8 actually has therapeutic properties very similar to Delta 9 THC, just with less psychoactivity. Anecdotal reports indicate that Delta 8 offers many of the health benefits of Delta 9 (help with sleep problems, stress, and pain management) without THC’s less-enjoyable side effects, like paranoia. As cannabis specialist and medical doctor Peter Grinspoon told Insider, “I can’t tell you how many patients I have who say, ‘I’d love to use medical cannabis instead of opiates for pain, except it makes me anxious.’ Delta-8 might be a very good option for people like that.” Believe it or not, there are plenty of people who are using Delta 8 for its therapeutic effects—which, in a nation where 136 citizens die from opioid overdoses daily, I think should be encouraged rather than derided.
With more than 140 known cannabinoids, it makes no sense for us as an industry to brand some of them as “bad” and others as “good.” Are we going to have these tugs-of-war and calls for bans over every single cannabinoid that becomes popular? Instead of arguing amongst ourselves, we could instead focus our efforts on legalizing all of these plant compounds, studying them to determine their capabilities, and creating standardized, evidence-based regulations and testing regimens to ensure consumer safety and adult use. Delta 8 is popular because it serves a need. Consumers want it, and it’s here to stay—the sooner that we as an industry recognize those facts, the better.
In 2002, Dale Katechis revolutionized craft beer. A seemingly simple packaging decision, putting craft beer in a can, sparked an international movement and put craft beer on the map.
Before the craft beer market really gained steam, consumers associated good beer with glass bottles and larger brands selling cheap beer with cans. Through education, creative marketing and a mission to put people over profits, Dale helped the craft beer market expand massively while sticking to his roots. He also managed to convince people to drink good beer from a can.
When Dale founded Oskar Blues about twenty years ago, he didn’t just succeed in selling beer. Through collaboration and information sharing, Dale propelled craft beer as a whole and lifted all boats with a rising tide. He’s hoping to achieve similar results with his new role in the cannabis space.
Veritas Fine Cannabis, the first craft cannabis cultivator in Colorado, announced that Dale joined the company’s leadership team. Jonathan Spadafora, partner and head of marketing and sales at Veritas, told us that he’s excited about working with Dale. He says Dale is already helping them open a whole world of branding and marketing opportunities. “This is our Shark Tank moment – we’ve got someone who’s been through the fire before and will help us keep differentiating, finding new avenues and new ways to solve problems,” says Spadafora.
His colleague, Mike Leibowitz, CEO of Veritas, shares the same sentiment. “Dale maintained company culture and quality as he grew Oskar Blues into a household name,” says Leibowitz. “Maintaining our unique company culture is paramount as we work to build Veritas Fine Cannabis into the same.”
Dale’s role in the leadership team at Veritas is about sticking to his roots. Through raising industry standards in the best interest of quality products and consumers, the team at Veritas hopes to expand the brand nationally, just like Oskar Blues did, while instilling a culture of disruption and innovation without compromising quality.
We caught up with Dale to learn more about his story and what he hopes to bring to Veritas, as well as the cannabis industry at large. And yes, I had a couple of Dale’s Pale Ales (his namesake beer) later that evening.
Aaron Biros: Your success with Oskar Blues is inspiring. Taking an amazing beer like Dale’s Pale Ale and putting it in a can sounds simple to the layperson, but you launched a remarkable movement to put craft beer on the map. How do you plan to use your experience to help Veritas grow their business?
Dale Katechis: I am hoping that I can apply some of the lessons that I’ve learned through making mistakes of growing a business from the ground up. There’s obviously a lot of road blocks in cannabis and that is certainly one of the qualities of Veritas – how they’ve grown and how they had to do it in an environment that is much more challenging than the beer space.
My experience in small business development could potentially help them navigate this next renaissance of the space. I’m going to help them compete and bring the industry to a level that helps everybody win. I certainly felt that way in the craft beer movement. It was very important to us to bring the whole industry along because we were educators, we weren’t salesmen. In doing that, lifting everyone to a level where the industry benefits as a whole is a part of small business growth. To me that’s the most fulfilling part. It wasn’t just about the Oskar Blues ego at the time, it was about the craft beer scene. And what’s happening in cannabis now is very similar to what happened in the nineties with the craft beer scene.
Aaron: How did you get interested in joining the cannabis industry? What made you choose Veritas?
Dale: Most of my life, I’ve been an enjoyer of cannabis. Very recently, in the last two years, I’ve been intrigued by getting involved in the space. I’ve been shopping around for opportunities and nothing really excited me until I met Jon Spadafora and Mike Leibowitz.
It was really the two of them, the comradery and how they treat their staff that was so similar to the culture at Oskar Blues. Call it a “passion play” if you will, but this was the best opportunity to get involved with a small company and hopefully be a value add for them being in the room and sharing ideas.
Aaron: As a pioneer and leader in the craft beer space, do you notice any commonalities between the growth of the craft beer market and the legal cannabis market?
Dale: It is kind of crazy how many similarities there are. Not just the industry as a whole, but specifically the commonalities between my business, Oskar Blues, and Veritas. Overall, that’s really what allowed me to want to lean in a bit more. I wasn’t in the place where I wanted to start anything on my own. I didn’t want to be involved in fixing anything. I’ve been involved in those situations before and I’m at a point in my life that I don’t want to fix anything. Thankfully there’s nothing that needed to be fixed at Veritas. That was an exciting piece of the equation for me.
Back to your question, how the consumer looks at cannabis versus how the consumer looks at beer in the craft beer space is very similar. There is a bit of an educational piece that’s happening where it’s almost a requirement in the cannabis industry and Veritas is leading that charge out front.
That’s what’s going to catapult Veritas and other companies if they follow suit. It’s their mentality and their philosophy of bringing the industry along as a whole, and I think it’s going to end up boding well for the consumer. The craft beer space was the same.
We had to educate people on a beer can and why we felt like a can of beer was important and exciting. The industry and the consumer associated cans of beer with large, industrial lagers and the can got a bad rap as a result. Not because it wasn’t a great package, but because they were putting bad beer in a good package. So, we had a long road of educating the consumer on the benefits of the can and I think what Veritas is doing with packaging now, how they use quality as such a fundamental pillar of their business, how they focus on the employee experience and the consumer experience sets them up for success, instead of just looking at the bottom line.
I’ve said it throughout my entire career, and at Oskar Blues, we never focused on the profits. You do the right thing for the biggest group of people moving the ball forward and the bottom line takes care of itself. Jon and Mike understand that so I don’t need to fight that battle. It’s another big similarity to the craft beer space.
Aaron: How can cannabis companies keep their craft? How can we, as an industry and as individual businesses, celebrate craft cannabis and follow in the footsteps of independent craft beer?
Dale: I believe that we’re starting to see some of that consolidation [that has been taking place in the craft beer market]. We’re at a time in the market right now where companies with such a solid foundation like Veritas don’t need to go that route to grow. I think we’ll start to see a lot more consolidation in the cannabis industry soon.
Back to the point of bonding together as an industry and as a whole. Championing some of the regulatory hurdles that are coming and sticking together is crucial. One company can’t do it. There’s going to have to be some comradery in the industry among everyone trying to hold the bar up high instead of racing to the bottom. You die by a thousand cuts. I’ve lived that life in craft beer and we saw what happened 6-7 years ago when the industry overexpanded because of exponential growth. A lot of egos got in the room, and a lot of breweries spent a lot of money building out capacity and then that same year the market popped out. Everyone who didn’t have a solid foundation, got washed out of the industry.
That’s why I appreciate what Jon and Mike are doing and how they built Veritas. It’s very similar to how we built Oskar Blues. We had humble beginnings; we didn’t spend money on things outside of our core competency. We focused on quality, employee experience, morale and holding on to the culture of Oskar Blues. That’s what Jon and Mike are doing with Veritas and I think that’s really important.
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