How small cannabis operators are preparing for interstate commerce

This is part of a regular series of MJBizDaily interviews with major THC industry players. To be considered for an interview, contact editorial@mjbizdaily.com.

Amanda Strickland believes Arkansas’ medical-only cannabis market may be in an ideal position to start supplying the rest of the country once federal marijuana rescheduling legalizes interstate commerce.

And that may not be an opportunity afforded to operators in places like Missouri or California.

Her theory is that operators in dual-market states would be required to split their medical and adult-use licenses to register their companies with the U.S. Drug Enforcement Administration before they could start shipping product across the country. 

No such administrative wrangling would be required in states that have yet to legalize adult-use cannabis, creating what Strickland considers a golden opportunity – but one restricted to a select few states.

“Arkansas has such an opportunity,” said Strickland, CEO of Rogers, Arkansas-based vertically integrated medical marijuana company The Source.

“As an independent operator, I worry and think about how independent operators in these hybrid states are going to react. It’s the first time I’ve been grateful that we have a medical-only program. We need state legislation authorizing the governor to enter into interstate compacts,” Strickland said.

Is Florida’s vertical license model a competitive trap?

Strickland plans to register The Source with the DEA – a task she called “scary” because it requires companies to answer whether the applicant has previously manufactured, distributed or dispensed controlled substances without DEA authorization.

But as a single-state independent operator, as opposed to a large publicly traded MSO, Strickland said she faces an uphill battle.

She fears that large MSOs are already positioning themselves for interstate commerce and will enter the state and push prices down.

“And that would basically make it where Florida could sell in our state, but we couldn’t sell in theirs because they have the protection from the way that their licenses must be vertical – they couldn’t sell our products in their stores.”

In Florida, there are no separate licenses for cannabis cultivation, processing or dispensaries. Instead, all activities fall under a single license called the Medical Marijuana Treatment Center license.

Can independent cannabis operators keep up with MSOs?

Compliance with existing state law and whatever federal rules appear will be the immediate challenge.

Strickland said the prospect of DEA registration is intimidating for operators who built their businesses outside of the traditional federal drug regulatory system overseen by the U.S. Food and Drug Administration.

“It’s kind of scary because it makes me admit I’ve been doing activity outside of DEA regulation,” she said. “Trulieve has already registered their 200 licenses – they’re not afraid.”

But major operational barriers remain.

Most states require marijuana producers and sellers to track their plants from seed to sale, which could be problematic if Strickland wants to do business in neighboring Texas, which does not use a software system to record activity.

Strickland pointed to Oklahoma’s historically looser market and Texas’ lack of a mandated third-party seed-to-sale tracking as examples of how uneven state programs remain.

If interstate commerce becomes a reality, she said, operators will need confidence that every supplier, buyer and service provider is registered and accountable. Oklahoma has mandated that its medical marijuana operators register with the DEA. It remains to be seen whether that’s a requirement other states will impose – or whether regulators will outsource that compliance check to operators.

“I need to make sure everyone that sells me products and everyone I sell products to is registered with the DEA.”

Who bears the legal risk when testing standards don’t match?

Testing is another open question.

If products move across state lines, regulators will have to reconcile different lab standards, labeling rules and shelf-life requirements, Strickland said.

She expects those gaps to create litigation risk, which is especially problematic for smaller operators already competing with larger companies that have deeper legal and lobbying resources.

“The whole hoopla is about accessibility, but this is a money game,” she said, warning that interstate commerce could drive prices down fast.

Strickland’s main concern is that large multistate operators could spread costs across broad portfolios and ship into smaller markets, turning cannabis into a commodity business driven by scale and price.

“How do we position ourselves?” she asked. “We cannot be behind these people that are so lawyered up and lobbying to push everything through.”

“Independent operators have to be part of the story.”

Is Arkansas’ conservative cannabis model its biggest strength?

But she also sees an opening for Arkansas to use its conservative medical-only framework as an advantage. Whether that happens will depend on how state lawmakers respond.

“If our legislators decided to step up and change some of the laws on the state level, we could be first to market on interstate commerce.”

Recent legal developments in Arkansas have also shown that voter-approved laws can still be revised, adding urgency to the debate over Amendment 98, the state’s medical cannabis law, and the market’s future.

For now, Strickland said, independent operators cannot afford to wait while bigger companies plan for what comes next.

“It’s a chess game right now. The people that are playing chess, they are playing for interstate commerce.”

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.