Last week, the Washington State Liquor and Cannabis Board (LCB) threw the state’s cannabis industry into panic with the announcement that its new traceability system, MJ Freeway’s Leaf Data, wouldn’t be ready until Jan 1. The development set the stage for a two-month gap between software systems, as the contract with the state’s current provider, BioTrack THC, will expire on Oct. 31.
With US Attorney General Jeff Sessions already critical of Washington’s legal cannabis program, failure of the state’s track-and-trace monitoring could be devastating. One of the key provisions of the Cole memo, a Department of Justice document outlining enforcement priorities around state-legal cannabis, is that states ensure cannabis isn’t being diverted out of state or to the illegal market. Without a tracking system, however, that’s impossible to demonstrate.
In other words, as Washington’s cannabis industry switches systems, Sessions is likely to be watching closely.
“We have no intention of giving the federal government any reason to give this industry a hard time.”
The LCB tried to extend its contract with BioTrack, but talks fell apart after BioTrack cited unaddressed security concerns and the LCB dismissed them as unfounded.
That impasse triggered the LCB’s contingency plan: a system of spreadsheets submitted on a weekly basis. Use of the manual system sparked rumors of product shortages, and many observers worried the industry’s ability to function during an incredibly busy harvest season might grind to a halt.
Jim MacRae, a data scientist who monitors the Washington cannabis industry, has called the situation the “Great Traceability Meltdown of 2017,” and has theorized that, under the spreadsheet system, there could be “pickup trucks full of bales of fine Washington Cannabis driving out of the state.”
BioTrack’s Plan B
This past Thursday, in something of an end run around the state, BioTrack CEO Patrick Vo sent an open letter to the industry announcing that the company would continue operating its traceability system independently. Under the arrangement, cannabis businesses would be able to continue transferring products and tracking production as usual.
“We have no intention of giving the federal government any reason to give this industry a hard time,” Vo wrote. “BioTrack understands that even with manual spreadsheets, there needs to be some method of communication and data exchange between licensees regardless of which third-party commercial system you use.”
The Cole memo mandates that legal states keep close track of their cannabis, ensuring that none is shipped across state lines or diverted to the black market. The fear is that cannabis could get lost under the spreadsheet system, as state regulators would be responsible for manually reconciling records rather than an automated software system that covers all licensees.
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“If someone is manually keying in, ‘Okay, I received Manifest #123, I have a dozen brownies with identifier #456, I have two dozen vape cartridges under #789,’ and they mis-input something—intentionally or from honest human error—it’s going to be a lot more difficult to track that down,” Vo said.
The LCB, for its part, has downplayed the transition. Brian Smith, the LCB’s director of communications, told Leafly that the state will collect exactly the same data it currently does, just on a less regular basis.
Data on destruction and transportation of cannabis will still be collected daily, he noted. And while he acknowledged it wasn’t an ideal system, he predicted that traceability enforcement—by far the agency’s highest priority for cannabis—wouldn’t suffer.
“We believe that we will enforce and we will be reviewing records, and we believe that most of our licensees will try and follow this new procedure correctly,” Smith said. “It’s too bad. We wish that there was more time and they wouldn’t have to make a change like this and it would happen automatically, but there is a period for two months that this will be in effect.”
Coordination is Key
Vo at BioTrack said it isn’t so much that the LCB won’t have access to the necessary data for enforcement, it’s that the data won’t be of much use to them if it’s not coordinated across the industry.
“The system we’re putting up just allows coordination,” he said. “If I’m using [the BioTrack inventory management client] and you’re using GreenBits, our systems can still exchange information. It’s going through the same switchboard.”
“The worst possible outcome in all of this is a splintered solution.”
Having that information reconciled in real-time is crucial to the LCB’s ability to conduct traceability enforcement, he said. Reconciling by hand all the data submitted via spreadsheets could be prohibitively time-consuming for the LCB’s enforcement staff
“This is one of, if not the, busiest time for these licensees,” Vo said. “Even taking malicious diversion aside, the licensees have so much activity that there’s definitely a potential for creating a high-risk environment with respect to errors and inconsistencies.”
Cannabis businesses in Washington, meanwhile, universally agreed that maintaining a consistent traceability platform was essential for the industry to function.
“The worst possible outcome in all of this is a splintered solution, some of them free, some of them paid, with different processors having to integrate with different solutions in order to work with different retailers,” Bob Ramstad, owner of Seattle retailer Oz, wrote in a forum discussion about the situation.
As of Monday, BioTrack still plans to maintain the tracking platform, which will be offered free to all state licensees for 30 days. After that, the company plans to charge each licensee a $50 subscription fee, which it says will go to cover costs.
“I can guarantee you that there will be turbulence.”
How the independent system will interface with the LCB is still undetermined. BioTrack spokesman Jeffrey Gonring said that having the central BioTrack system generate the necessary spreadsheets for all licensees, instead of leaving it up to the various third-party software providers, was a possibility, but that it wasn’t currently part of the system.
At least, Vo concluded, there is a system.
“Please remember that we are attempting to surf a wave in the wild here, so I can guarantee you that there will be turbulence as we go,” he wrote in his open letter.
“However, my team and I believe that this is our best option to avoid industry Armageddon and we will all band together to navigate these unpredictable waters as best we can.”