As a still-young industry, many are all too familiar with the stringent compliance protocols attached to cannabis today. Cannabis retailers across the U.S. must comply with an array of rules carried down by state cannabis officials, in part to ensure they check ID and that products stay out of the hands of underage consumers.

Data published in the journal Addictive Behaviors sheds new light on just how well dispensaries follow these regulations, ultimately finding that adult-use retailers across five U.S. cities were in strict compliance with laws requiring patrons to show identification and proof of legal age.

“As cannabis retail expands in the U.S., its surveillance is crucial to inform regulations and protect consumers. This study addresses this need by conducting point-of-sale audits examining regulatory compliance (e.g., age verification, signage), advertising/promotional strategies, products, and pricing…” authors state in the abstract.

Cannabis Compliance: ID Verification, Warning Signage and Appealing to Minors

A team of investigators affiliated with George Washington University’s Milken Institute of Public Health conducted point-of-sale audits of 150 randomly selected recreational dispensaries in Denver, Los Angeles, Las Vegas, Portland, and Seattle, 30 for each city. Investigators conducted the audits in summer 2022.

Age verification rates were high, above 90%, and the majority of retailers had signage indicating restricted access (87.3%), onsite consumption (73.3%), and distribution to minors (53.3%). Retailers were also likely to post warnings regarding cannabis use during pregnancy and while nursing (72%), followed by health risks (38%), impacts on children/youth (18.7%) and DUI (14%).

Conversely, 28.7% posted health claims about cannabis, 20.7% posted “youth-oriented signage” and 18% had products with “youth-oriented packaging.”

Other Signage, Marketing and Product Findings

The study also explored other information dispensaries generally posted and marketed in store. Price promotions were highly prevalent, especially price specials (75.3%), followed by daily, weekly, and monthly specials (66.7%) and signage regarding membership programs (39.3%). 

One-fourth of the stores had signs and promotions advertising curbside delivery/pickup (28%) and/or online ordering (25.3%). Social media and website promotions were noted in 64.7% of audited stores. 

Finally, investigators took a closer look at the product selection offered by retailers. The most cannabis products were most often e-liquids (38%) or oils (24.7%), with edibles appearing most frequently (53%) as the least potent product.

The most expensive product was often bud and flower (58%); the least expensive was joints (54%). More than 81% of retailers sold vaporizers, rolling papers and glass, like hookahs, water pipes and bongs; 22.6% sold CBD products.

Results Echo Past Compliance Data

“Marketing strategies differed across cities, reflecting differences in state-specific regulations and/or gaps in compliance/enforcement,” investigators wrote. “Findings underscore the need for ongoing cannabis retail surveillance to inform future regulatory and enforcement efforts.”

NORML Deputy Director Paul Armentano commented on the study’s results, initially emphasizing, “Regulation works.”

“Illicit marijuana providers don’t ask for or check for ID, but licensed businesses most certainly do,” Armentano wrote in a NORML blog post. “States’ real-world experience with marijuana legalization affirms that these policies can be implemented in a way that provides regulated access for adults while simultaneously limiting youth access and misuse.”

The age verification numbers are consistent with previous research. Specifically, one 2022 study focusing on the California market found that dispensaries were highly compliant with ID policy, 100% total compliance with ID policy among the randomly selected retailers.

“It appears that licensed California recreational marijuana outlets avoid selling marijuana to underage customers. One reason could be a strong incentive for recreational marijuana outlet owners and managers to avoid being shut down for an illegal activity,” authors wrote.

That study also suggested that further studies and cannabis enforcement agencies should investigate if underage patrons attempt to enter cannabis retailers with fake IDs and whether underage patrons are obtaining cannabis from illicit dispensaries or other sources.

A bulletin issued by the Colorado Marijuana Enforcement Division in August 2022 also found that, of more than 190 compliance checks utilizing underage operatives, four businesses in the state made a sale to those individuals, demonstrating a 98% compliance rate.

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Out of all the issues associated with the volatile nature of industries such as the cannabis industry—compliance is the top barrier, representatives from multiple companies said. As it turns out, sectors such as the healthcare industry face similar problems with compliance.

According to a new study announced by The Harris Poll and Fyllo on September 21, nearly two-thirds, or 63 percent of companies see compliance issues as a “critical barrier to growth.” Representatives from highly regulated industries were asked a series of questions in a survey—with a selective highlight on the cannabis industry in particular.

The study is entitled, “Leading With Compliance: The Key To Growth In Highly Regulated Industries.” Researchers surveyed 305 compliance leaders at companies in highly regulated industries including cannabis, healthcare, financial services, alcohol and pharmaceuticals.

The results revealed a common denominator: all of the highly-regulated industries struggle with a complex web of federal and local legislation and an outdated compliance approach—not just the cannabis industry.

“In the face of fast-paced regulatory demands, outdated processes can’t keep up and that derails growth,” said Chad Bronstein, CEO and founder of Fyllo. “This survey revealed that companies want to utilize technology to understand regulatory updates, whether new laws or even just local legislative conversations.” Fyllo offers software to overcome the complexities of compliance. Fyllo’s Data Marketplace, for instance, can target previously inaccessible cannabis and CBD consumers.

Nearly 50 percent said noncompliance results in higher costs to attract new investors and win new customers. Eighty-two percent report that adhering to regulations drains resources that would otherwise drive expansion into new markets, new products/services and innovation.

Twenty-five percent said problems led to a loss of customers; 20 percent said it led to employee turnover. Seventy-three precent of companies say compliance issues damage trust among consumers, regulators and employees.

Survey respondents also said that getting fined for noncompliance is practically unavoidable—just something they have to learn to deal with.

Over three-quarters, or 82 percent of companies in highly regulated industries currently accept that compliance is a cost of doing business, over the past five years, these companies have been cited on average 12.6 times for noncompliance. 

This results in extensive operational, reputational and financial risks. Moreover, the majority of compliance leaders admit that they are often uncertain as to whether or not that the organization is compliant due the dynamic nature of the regulatory environment.

Constant changes in laws is getting to be the norm, but most companies said they can handle it, albeit the technological problems that make it more difficult.

When asked if their company could adapt quickly to sudden changes in its regulatory or compliance environment, 61 percent said they did not believe their company could, with 28 percent citing outdated technology as the core cause for those problems.

Compliance in the Cannabis Industry

Depending on how you define regulation and if you include nuclear industries, etc., cannabis remains one of the most-regulated industries in the U.S. However, IBIS World ranks the healthcare industry as the most regulated industry of all, which of course overlaps with medical cannabis.

The discord between state and federal law makes the cannabis industry unique in the sense that laws often contradict one another more than you’d see in other industries. It would require a figurative PhD of regulation just to understand the full scope of the patchwork of state cannabis laws.

“Cannabis professionals are operating in a regulatory environment that changes daily across federal, state and local levels,” Bronstein added. “As such, cannabis businesses have been quick to embrace tech solutions that streamline compliance processes to free up resources for growth, with the industry becoming the benchmark for effective management of compliance processes at scale.”

Noncompliance in the hemp industry, for instance, is a problem. New Frontier Data reported that over 4,000 acres of crops were destroyed in 2019 (out of the 242,565 acres that were planted) because they were considered to be “hot crops” that surpassed the THC limit. Although crops in 2020 decreased, hot crops still increased, which led to an even more devastating year with 6,234 labeled as hot.

Cannabis and hemp laws are constantly changing at a rapid pace, much faster than you see in other established sectors such as traditional healthcare.

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Move as quickly as the cannabis industry, printing variable data on demand.

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