Cannacurio #91: Diving into Cannabis Industry Violations and Recalls

Cannabiz Media has been tracking license violations and product safety recalls as part of its market intelligence platform for nearly a decade. With years of industry data at our fingertips, our research team recently undertook an effort to organize and categorize compliance data into a cohesive, digestible tool: a violations and recalls dashboard.

Violations by State and License

Our research team reviewed nearly 6,500 license violations to date, and with industry stakeholder input, we devised a taxonomy to identify each violation with one or more labels:

• Security
• Inventory
• Point of Sale
• Operations
• Recordkeeping
• Packaging
• Sale to a Minor

As our team looked into the rules and violations found in each state, a few common trends emerged:

• Track-and-trace compliance issues were frequently found—Inventory accounts for nearly 10% of violations in the database.
• In addition to track-and-trace issues, Security and Point-of-Sale violations also accounted for nearly 10% of all violations, each.

• Security broadly includes the use of cameras, other monitoring systems, and employee badges.
• Point-of-sale violations include, for example, noncompliance with advertising restrictions as well as daily, exceeding monthly purchase (quantity) limits, and selling cannabis on credit.
• States have varying rules on advertisement and what can be marketed, both inside and outside the dispensary. Additionally, purchase limits, either per transaction, or per month, commonly arose as a violation, while this was more common in medical programs. These were common point-of-sale violations found.

• The largest type of violation is Operations, which includes, for example, operating outside of the authorized scope for the approved license, unauthorized/untagged plants, and using equipment not authorized for cannabis production. These account for roughly one quarter of all violations.
• Sale to a Minor accounts for fewer than 5% of violations nationwide, but is one of the most common causes for concern among regulators, legislators, and law enforcement. Given this importance, industry stakeholders recommended we create a discrete category for sales to a minor as it is a distinct part of FINCEN guidance.

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Some particularly egregious or detailed violations fall into many categories. We carefully reviewed and hand-classified each license violation in our database, ensuring that each one fit into one of the categories above. Some regulator data could not be classified.

What does the world of recalls look like?

Cannabis product recalls are a different story. Compared to violations, there have been far fewer over the past decade. We have chronicled nearly 200 recalls into 7 seven categories.

As the table indicates, pesticide recalls are the leading problem nationally, resulting in roughly one-third of all product recalls. Mycological contaminants are in second place, with a string of recent Aspergillus issues nationwide. Some states have issues with organic and inorganic contamination, unlicensed/out-of-state products, and untested products, as well.

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Looking at the leaderboard, the top states for recalls include long-established adult-use markets, with one exception: Ohio. Ohio regulators have published fifteen recalls since the medical cannabis program’s inception, and adult-use licensing will begin later this year in advance of the first recreational sales. Michigan’s presence on the leaderboard, with nearly three dozen recalls since the launch of medical and adult-use cannabis licensing a few years ago, is not shocking. The state has been home to a few cannabis testing scandals, including a major recall of over 64,000 pounds of product worth nearly $230 million; which has seen almost two years of litigation.

Between the violations and recalls dashboards, these new visualizations will help expand users’ understanding of compliance issues while also uncovering possible sales leads. Views illustrating state-by-state and license-level violations may help point to statewide and national market trends and concerns. Users can focus their search by state or by year to create a deeper dive. Additionally, a license leaderboard shows violations and recalls at the license level, and roll-up fields summarize the violations by category per license. Dashboard users will be able to target recall data by state, date, and type to hone their analysis and identify compliance issues, problems, and markets based on their own focus and search parameters.

This exciting new improvement will help Cannabiz Media users to better understand current regulatory and compliance challenges license holders face, while providing an opportunity to reach new clients with possible solutions to significant operational challenges. The Violations and Recalls dashboard joins other recently released visualizations, including Union and Labor Peace Agreements, and Social Equity Licensing.

Cannabiz Media

Cannabiz Media customers can stay up-to-date on these and other new licenses through our newsletters, alerts, and reports modules. Subscribe to our newsletter to receive these weekly reports delivered to your inbox. Or you can schedule a demo for more information on how to access the Cannabis Market Intelligence Platform yourself to dive further into this data.

Cannacurio is a column from Cannabiz Media featuring insights from the most comprehensive cannabis market intelligence platform. Catch up on Cannacurio posts and podcasts for the latest updates and intel.