Can California Really Track All the Weed in the World’s Largest Cannabis Marketplace?

cannabis track-and-trace

In the abstract, track-and-trace sounds simple enough. Cannabis products are given numbers, and the state is then able to see where all of this marijuana goes to ensure none is being diverted out of state and everybody pays their taxes. Sarah Reingewirtz/Digital First Media/Pasadena Star-News via Getty Images

Last week, cannabis retailers in Washington State—the second state in the union to allow for legal marijuana commerce, now in its sixth full year of licensed sales—suffered through a two-day unplanned holiday.

Business was going on as normal in the front of the store, but retailers were unable to acquire more product from vendors, and vendors sitting on product were unable to release it to retailers. The culprit, as the Seattle-based Stranger reported, was a glitch in the software the state uses to attempt to monitor all of the legal marijuana in Washington State. Following a planned two-day outage for maintenance, something else went wrong, and not for the first time, the state’s “track-and-trace” software was down for almost four days.

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Without the ability to log sales and tell the state where the weed was, wholesale transactions were off-limits—and, as the newspaper reported, there were fears that more data, such as lab-testing results, would also be lost, necessitating a costly and time-consuming do-over on perishable products like cannabis flower.

Industry insiders in Washington blame both the software vendor contracting with the state, MJ Freeway, and the state itself. Some of the angrier cannabis businesspeople in Washington are considering suing the state to pressure regulators to drop the track-and-trace system altogether. But, as some industry watchers observed on social media, meltdowns like this—and resultant disruptions in the marijuana industry—have become semi-regular occurrences in Washington.

What better timing for California, a state with almost six times the population of Washington and the world’s largest legal marijuana marketplace, to stage its own experiment with track-and-trace—arguably the single largest and most ambitious attempt to closely monitor an agricultural industry in recent memory?

Among the many promises of California’s recreational marijuana legalization ballot initiative, 2016’s Proposition 64, was that the state would be able to figure out the location and fate of every scrap of weed bought and sold “from seed to sale.”

This vow was made, in part, because it was considered the best way to adhere to what limited guidance there was from the federal Justice Department and to make legalization the most palatable for those law-enforcement authorities who might have been otherwise compelled to squash it dead.

In the abstract, track-and-trace sounds simple enough. Cannabis products are given numbers, signifying in which “batch” and “lot” they originated. Products are sent off to labs for testing. Products are handed from a producer to a distributor to a retailer for sale. The state is then able to see where all the product goes to ensure that none is being diverted out of state and that everybody pays their taxes.

On a practical level, problems abound. As Marijuana Business Daily reported earlier this month, not every licensed California cannabis company is using it. Only businesses with “provisional” or “annual” licenses are required to use track-and-trace. This sounds obvious until you consider that there are still roughly 600 cannabis businesses operating on “temporary” licenses, which are set to expire at the end of this month.

Some are waiting for their other license applications to be approved, but since they need cash flow in the meantime, they’re out there transacting—and creating reams of paperwork, often filled out by hand, for companies in the system who want to do business with a vendor outside of it. Even worse, if a retailer wants a certain product from a vendor who’s not in the system, the retailers must affix, by hand, unique product identifiers on the products before they are sold—effectively telling the state that they’ve sold cannabis product the state didn’t necessarily knew it had beforehand.

The software vendor chosen for this task is called Metrc, a product of Franwell, a Florida-based company, and was designed with a simpler state framework in mind. (In Colorado, for example, cannabis is not required to be transported from source to sale by a licensed third-party distributor as it is in California.)

Franwell did not respond to a request for comment from MJ Biz Daily—which suggests that it may be well aware its platform isn’t very good. But when you have a contract with a state, who cares?

Hovering all over this is the argument that track-and-trace was never really necessary at all, and was just a sweetener made to sell legalization. There is absolutely an argument to be made that a mandated massive inventory control system creates an unnecessary burden on legal producers—and doesn’t do much to halt the flow of cannabis to the underground market, which one analysis guessed is worth $3.7 billion, or four times the legal market.

California cannabis entrepreneurs contacted by Observer for this article reacted with grudging acceptance. The system doesn’t seem perfect, or even very good, but these are the rules—and state regulators haven’t yet been heavy-handed with those who haven’t obeyed.

“So far, the BCC [Bureau of Cannabis Control] hasn’t been out to get people—they understand this is a process,” said Neil Dellacava, a partner with San Francisco-based Gold Seal, a product brand and distribution hub.

A “widespread implementation date” rather than the rolling basis, with different requirements for different licensees, may have been better, but failing that, product manufacturers and vendors just need to be prepared for hiccups and delays, he added.

Back in Washington, however, patience has worn so thin that there are serious rumblings whether track-and-trace wasn’t just an unnecessary over-promise to begin with.

As Gregory Foster, who sits on the Washington State Liquor Control Board’s Traceability Advisory Committee, told The Stranger, track-and-trace was implemented when the Justice Department seemed to put weight on a state’s ability to keep weed out of the underground market. States have largely failed to do that—because law enforcement on all levels has also failed to do that. Maybe traceability is overrated?

Maybe, but on the whole, “I don’t think it needs to be such a controlling approach,” he told the paper. “We need to move towards more of a standards-based approach and get the state out of the business of trying to operate the marketplace.”

Because if it didn’t work in Washington, what evidence is there that it will work at a much larger scale in California?

Can California Really Track All the Weed in the World’s Largest Cannabis Marketplace?