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Making It Legal: The Tech Implications of Regulating Recreational Marijuana

Legalizing recreational marijuana has a broad range of policy implications for government. Do jurisdictions have the IT systems in place to deliver on the will of the voters?

The government needs help.

On Nov. 9, four states — and the local governments they contain — woke up to a mandate from voters to fully legalize a product that has long been illegal. A product the federal government still treats as illegal. A product at once in high demand and very controversial.

But there are two advantages these states have when it comes to regulating the newly legitimate marijuana industry: technology and the experiences of states that came before them.

As these states — California, Nevada, Massachusetts and Maine — roll steadily toward implementation deadlines, all are searching for technology solutions to help them regulate the drug. And underneath the largest, most obvious solutions there lies a sea of probable and possible problems that technology might also solve.

Bringing Older Systems Up to Speed

The transition here is at once wholly unique and mostly redundant. Numerous government officials in the states that began regulating legalized marijuana years ago found themselves realizing that many of the processes they needed to put in place were the same as those they already used for alcohol or gambling or other work — background checks, business licensing and safety inspections, for example.

But there are a couple key differences. A big one is that marijuana is both controversial and in a legal gray area. A federal memorandum issued when states started legalizing medical marijuana has driven many of the decisions state and local government have used when regulating recreational marijuana.

Another is that marijuana is a very new industry. It isn’t often that an illegal industry of this scale blossoms into legitimacy. And it is blooming in a very unique environment: the age of the Internet.

On the Periphery

There are a number of other issues governments will encounter once marijuana is legal that may not have technological solutions.

A potentially huge issue is fee and tax payment.
At a December working group with legislators, bankers, industry representatives and advocates at the California state Capitol, public servants and marijuana entrepreneurs told stories of banks too afraid of the federal government to provide service to people working with cannabis. Many banks will refuse to hold checking accounts for people who need business accounts to pay taxes and fees out of, fearing conspiracy drug charges from federal agents. Which means that the marijuana industry must often pay those taxes and fees in cash. At the very least, that means bumping up security for people who must handle those large cash payments. At times, agencies that don’t accept cash must figure out how to collect payments from a mostly cash industry.

“Of course if there’s a technology solution out there, we would welcome it,” said Lori Ajax, chief of the California Bureau of Medical Cannabis Regulation. “But at this time … we certainly want to be able to take credit cards and other methods if possible, but if not, then we have to have protocols in place to take cash payments as well.”

There’s also the issue of driving under the influence. There is no equivalent of the breathalyzer for marijuana, making it difficult for law enforcement officers to determine if a driver is high or to back up that claim with evidence. The tests that do exist are controversial.

Last, there’s a need for state and possibly local governments that haven’t regulated pesticides before to begin doing so, in one way or another. Pesticide regulation in other industries might be left up to federal agencies, but since the federal government doesn’t recognize marijuana as a legitimate industry, those agencies don’t intervene in states that have voted to legalize it.

The end result for many government agencies that have gone through this process is that the need to regulate the new industry has given them the ability to improve the work they do in other areas as well. In Denver, the need for inspectors to look up information in the field led to the city approving more requests for tablets — which are used for all kinds of mobile work. In Oregon, the state turned to preferred vendor NIC to develop a digital marijuana licensing system. State officials now hope to use the system to replace the old paper-based processes for alcohol licenses.

“We realized that [paper] … wasn’t practical for this emerging industry, and it just wasn’t the right solution,” said Mark Pettinger, a spokesperson for the Oregon Liquor Control Commission. “We needed a technology solution.”

State Needs

As always, the needs for technology will differ between states and localities, and the laws of each state will set the tone for what’s necessary.

But there are two commonalities between recreational marijuana states: seed-to-sale tracking and licensing systems.

Seed-to-sale tracking is a paradigm where states follow marijuana from its very infancy to the point where it’s sold over the counter. It allows public officials to make sure growers are following planting limits, creates data about how much is being bought and sold, and helps the state make a credible case to the federal government that it’s not allowing the legitimate market to touch the underground one — among other things.

There are major vendors already satisfying this need — some that have won contracts with states that have legalized marijuana include Franwell’s Metrc system and BioTrackTHC from Bio-Tech Medical Software. Vendors have worked to improve these systems, including offering training to marijuana businesses on accurate data reporting, and the prices may have dropped since they launched. Alaska, for example, spent less than it expected to for Metrc, according to Cynthia Franklin, former director of the state’s Alcohol and Marijuana Control Office.

Business licensing systems have also been a major need for states implementing legalization laws. Colorado built up a system already being used for businesses involved in liquor, gambling and auto sales that assigns license numbers to businesses and tracks renewal dates, disciplinary actions and more. Alaska set up a new Internet-only application process that connected with an existing benefits portal as well as a tweaked version of databases the state uses for other professional licenses.

Part of the licensing process often involves background checks from law enforcement as well, a prerequisite meant to keep the illegal world separate from the legal.

In the case of Massachusetts, which recently delayed its implementation timeline, some are looking for a hybrid system that handles both licensing and tracking. Massachusetts got a head start on the process, sending out a request for questions about such a system the month before the election.

“We wanted to combine these … with an eye toward efficiency, but also an attempt to minimize the need for licensees to interact with different systems,” said Shawn Collins, legislative and policy director for the Massachusetts State Treasury.

After all, many people in many departments will need or want access to the kinds of information contained in both systems, and many will need to collaborate to regulate the now-legal drug. That’s been a repeating theme in states that have voted to legalize — there is a very broad array of regulatory needs and an equally broad range of government agencies that must work to meet them. An information flier from Oregon lists five state agencies responsible for seven broad areas of regulation, each of them broken down into various specific responsibilities.

Agency collaboration has been key in Colorado, said Lewis Koski, deputy senior director of enforcement with the state’s Department of Revenue.

“This really covers a great many disciplines, and I’m not sure anyone seven or eight years ago, when we got started with this, [knew] how many different agencies and professions this is going to touch,” Koski said. “So when we talk about needs and requirements, one of the things we learned early on was we really needed to do a good job as a group of government agencies that haven’t had as much of a need to work together in the past as they have on marijuana. We really needed a framework to work together and get things done.”

As marijuana is legalized in more states, governments are in search of technology solutions to regulate and track the emerging industry. Photo courtesy of APIMAGES.COM

Because each state has its own rules, the requirements and quirks of the technology serving the new industry will vary. California has already selected Accela to handle licensing needs for two of the three state agencies given licensing authority under its legalization proposition — but it’s going out to bid for a vendor that can integrate systems. The goal is to have a system that’s as close to a one-stop shop for users as possible and reduces the amount of redundant or unnecessary information people must provide when applying for licenses.

In the process, California will be looking for a system that can support a large number of users — it is the most populous state in the union, after all — as well as one that can change to meet evolving laws and regulations over time.

“A big lesson learned for all the states is the need to be able to pivot and change direction and be nimble, because with all of these states you had changing legislation, even changing regulation,” said Lori Ajax, chief of the California Bureau of Medical Cannabis Regulation. “We’re looking at that from all aspects, even the technology aspect: the ability to be able to pivot quickly.”

Local Needs

Local government will need help regulating marijuana as well. Though many legalization laws allow local governments to restrict or ban the drug — some towns in Maine are seeking to do exactly that — many more will be faced with an industry at once heavily scrutinized and with a lot of confusion attached to it.

In Denver, that meant adopting a new management system to make the permitting process more efficient. Marijuana businesses seeking permits from the city, which is also a county, must go through several inspections — fire, environmental health, and building and zoning, for example. The solution Denver chose, from Accela, allows people in various departments to access files and information from one another.

“You can imagine for our city attorneys in particular [how easy it is] now being able to go into a record and pull up anything that might be in a given file in their computer instead of coming down, searching through a file cabinet, then it’s not in there, and then they have to go try to find it on somebody’s desk,” said Dan Rowland, a spokesperson for the city-county.

For Denver, the new need to regulate marijuana also gave more utility to mobile devices. It’s become easier to justify buying those devices for field inspectors — and once they’re available for marijuana inspections, they get used for many other things too.

“They can pull up files that might be in the record like the floor plan … and they can take photos if they see a violation and upload them to the record right there so that the enforcement efforts are tightened up,” he said.

That has, in turn, encouraged cross-department collaboration where it makes sense.

“By necessity we have sort of broken down some of those silos,” Rowland said. “Especially our police and fire folks that work really closely with the marijuana businesses say things like … ‘I’ve never had a firefighter’s number before this, and now I have four or five guys I can call up at any moment and ask them about an issue at some facility.’”

Everybody Needs Data

At any level of government, public officials who regulate marijuana are likely to find themselves trying to answer questions about numbers they may or may not have — has driving under the influence increased or decreased since marijuana became legal? Have crime patterns changed? How much money is coming into public coffers, and is it growing?

In Colorado, both Koski and Rowland have found themselves trying to answer those questions. And both wished they would have had better systems in place before legalization to collect and analyze the data they need to do it.

“You see this insatiable hunger for data, whether it’s from the media or from your constituents or from other governments,” Rowland said. “Everyone wants to know how many businesses are there, how many crimes are there and what kinds.”

In the intervening years, Denver has beefed up its data collection and publishing in order to give the public the answers people are looking for. According to Rowland, some 7 percent of Denver’s open data catalog is devoted to information related to marijuana in some way. By comparison, 2 percent of the catalog is related to revenue and less than 1 percent is about crime.

There are still problem areas. Koski said many people have been interested in things that the state simply didn’t collect the right kinds of data on before legalization. Some have wanted to know whether the number of high school students expelled for marijuana has increased since the drug was legalized. Some have asked whether charges for driving under the influence of marijuana have risen.

The trouble is, expulsions for drugs weren’t broken down by type of drug, and officers who suspected a driver was both drunk and high would often just make the case an alcohol charge.

“It would have been really helpful for us to establish a lot of baseline data well in advance of legalization so we could have that baseline to work off of to determine as soon as possible what the policy impacts were,” Koski said.

The lesson has not been ignored in California, where state officials have consulted Colorado and other jurisdictions that learned firsthand the need for good data management. Scott Paterson, senior adviser for the California Department of Technology, said the building of a public information website is a high priority for the state as it prepares for a legal marijuana market.

“We know that as soon as Jan. 1 [2018] hits, people are going to want certain amounts of information — how many applications, how many accepted, how many pending,” Paterson said.

A Growing Market

In the future, perhaps the near future, there might be many more state and local government entities looking for solutions like these.

Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws, expects more states to at least pursue marijuana legalization.

With the surprise victory of Donald Trump in the November election — and his subsequent naming of a traditionally anti-marijuana attorney general in Jeff Sessions — the willingness of voters and lawmakers to choose legalization might change.

“I would anticipate that, at least initially, lawmakers take an even more conservative approach to this issue in 2017 — at least until they begin to get a sense of where the Trump administration stands on the issue,” Armentano wrote in an email to Government Technology.

But the movement has momentum. Assuming successful implementation of the ballot initiatives that passed in November, the number of states where marijuana is legal for recreational use jumped from five to nine — and one of the new ones just happens to be the most populous state in the U.S. The systems have claimed billions in tax revenue and new avenues of tourism. Basically, a whole new industry that cannot, by law, be anything but local.

So in the next two years, a number of states could jump on the bandwagon through legislation or ballot initiatives. Armentano expects legalization bills to be introduced or reintroduced in the legislatures of New Mexico, Delaware, Connecticut, Rhode Island, Vermont and New Hampshire in 2017. Of those, he gave Rhode Island, Connecticut and Delaware the highest likelihood of success.

On top of that, some people are already organizing to get legalization initiatives on the ballot in Michigan and Florida for 2018. Florida voted to legalize medical marijuana in November, and Michigan has had medical marijuana for years.

Ben Miller is the associate editor of data and business for Government Technology. His reporting experience includes breaking news, business, community features and technical subjects. He holds a Bachelor’s degree in journalism from the Reynolds School of Journalism at the University of Nevada, Reno, and lives in Sacramento, Calif.