The cannabis industry is full of contradictions. Although more than half of the United States has legalized—and therefore legitimized—some form of cannabis commerce and usage, it remains illegal under federal law. The drug's stringent controlled substance label prevents it from being researched, and banks take a risk if they accept money from cannabis companies.
The industry's strict state-by-state regulations mix policy, political influence, and borrowed best practices to create detailed rules that vary vastly by location and can be difficult to interpret and implement, and a lack of overarching guidance can leave organizations vulnerable.
And where the security industry falls into all of this—with its reliance on metrics, experience, and best practices—is still being explored. The challenge of protecting a product that just years ago was considered criminal cannot be ignored. And, as each U.S. state implements different regulations that are enforced by different entities, it's difficult to compare notes with other security practitioners trying to navigate the nascent industry.
A Growing Industry
Tim Sutton, CPP, was working as a senior systems engineer for a security integrator in 2013 when his company received a call from someone who was going to apply for a cultivation center permit. Medical cannabis legalization in Illinois was going into effect at the start of 2014, and the caller needed someone to write a security plan—one that would set the standard for cultivation center security in Illinois.
The task fell to Sutton, who used his experience with creating security plans for other industries to outline a proposal to win the contract. He integrated foundational security principles, including asset identification, threat assessment, hazard vulnerability analysis, and physical security measures, into the proposal. The plan also took other factors into consideration, such as geographical, architectural, and operational elements, as well as electronic security systems and policies and procedures.
His firm won the job, and that's when the real work began, Sutton says.
"There really aren't too many resources available for security plans in general, let alone within the medical cannabis industry," Sutton explains. "As much as security principles remain constant, the application of these security principles must remain variable to be effective."
Site security plans had to follow the newly outlined laws, which differ from state to state and range from vague to incredibly detailed—and, at times, confusing, Sutton says.
"Many of the requirements under the law really made me wonder how in the world they were included, but the security plan had to meet all of the requirements," he says. "The security plans are generally considered for between 20 to 30 percent of the total score for the application depending upon the particular state, and many times the score of the security plan is used as a tie-breaker in the awarding of a permit."
Sutton was able to tour established cultivation centers and dispensaries in another state to better understand how they worked, what security measures were in place, and how those compared to what Illinois would require. "This also allowed me to see many things that I wanted to be sure to avoid or improve upon when writing plans for other organizations," he adds.
The application Sutton created was approved, and the cannabis company was able to open two cultivation centers. "That was huge," Sutton says. "Illinois is very highly regulated."
Sutton went on to work with another cannabis company, won three dispensary permits for them, and suddenly found himself an expert in the industry's security. "That's the way it was," he says. "You win one permit in Illinois and that means something. I didn't realize how important that was."
Since then, Sutton has helped cannabis organizations all over the country apply for dispensary and cultivation center permits and now works as the director of security for Grassroots Cannabis, where he's responsible for security at sites in several states, including Illinois, Pennsylvania, and Maryland. Many cannabis organizations are consolidating, since it takes a lot of money—and expertise—to successfully open and run a dispensary or cultivation center.
"Nobody knows what they are doing," Sutton notes. "I've never grown marijuana and not many people have ever even seen it. These organizations are consolidating and trying to branch out to other states."
The path a state takes to legalize medical or recreational cannabis—and who is involved in that process—is one of the biggest indicators of what the law looks like and how it's regulated, says Bob Morgan, special counsel for Much Shelist and former statewide project coordinator for Illinois' medical cannabis pilot program. Morgan was involved in crafting the legislation and framework for the program and managed its implementation once the law was enacted in January 2014.
"Every state that develops a medical cannabis program creates it in its own image, which reflects the political, cultural, and administrative structure of its respected law," Morgan tells Security Management. "Illinois was no different. It had multiple agencies that were responsible for implementing the program—the Illinois State Police and the Departments of Agriculture, Public Health, and Financial and Professional Regulation (IDFPR). Those agencies collectively were responsible for establishing security measures and regulations for the industry, from start to finish."
Ultimately, each state will model the cannabis industry after another existing industry—often based on what agencies are responsible for its implementation, Morgan notes.
"Colorado's medical cannabis program was overseen by its Department of Revenue," Morgan says. "So, the culture and process and structure of the Department of Revenue has laid the groundwork for the subsequent medical, and now recreational, marijuana industry. In Illinois, our agencies here all put a significant imprint of their agency culture on the program we have now. In a state like Florida, the Department of Health is overseeing implementation of the medical marijuana program. That determines whether a state will treat the cannabis industry like a pharmacy, or a bank, or a casino."
Sutton has experienced firsthand the challenges of the differing approaches to the industry. Despite being proficient at writing security plans for the cannabis industry in Illinois—a notoriously highly regulated state—he says navigating security specifics in many states can be daunting for an unexperienced practitioner. "I always read the rules and the law, and every part of the law," he says.
For example, Sutton was tasked with developing a security plan for a cannabis organization in Hawaii. Its permitting rules are broken down into sections, including one for security, which dictates that, among other things, an organization must retain 30 days of video in its archives.
"An inexperienced person would design a system that retains 30 days of footage and feel like they're doing what they should do," Sutton says. "But, if you read the rest of the rules and the section on records retention, there's a retention requirement of a year for you to keep inventory reports, employment files, and electronic video archives. If you didn't read that whole rule, you'd never know that and would design the system for 30 days and it would be 12 times too small. It's terrible. That's how I attack it—I read the whole rule, not just the security section."
Regulations vs. Best Practices
To overcome the challenge of crafting Illinois' medical cannabis regulations in 2014 without national guidance, Morgan created a listserv of state cannabis program directors from around the country to share best practices. He also pulled ideas from the rules in place for pharmacies and casinos in the states.
"We weren't really recreating the wheel, we were taking the best ideas and security measures we could find and incorporating that into the industry as we shaped it," Morgan explains. "Part of this is driven by the problem of the federal government's prohibition, which requires each state to do this in a haphazard way."
Some states—including Illinois—may have "gone overboard" with regulating the nascent industry due to a lack of national best practices, Morgan notes. For instance, Illinois is the only state that requires patients to be fingerprinted to get a medical cannabis card.
"That was a political consideration—it had nothing to do with policy or security, it was politics, unfortunately," Morgan says. "Almost every state has some variation of that."
Sutton agrees, noting that he has had to comply with head-scratching security requirements in both Illinois and other states. Illinois' Department of Agriculture oversees regulation at cultivation centers, while distribution centers answer to the IDFPR. The two departments wrote the regulations for their respective facilities, meaning that an organization trying to open both cultivation and distribution centers may need to abide by two separate sets of rules. And sometimes those rules don't align with overarching best practices in the security industry, Sutton says.
"For cultivation centers I record on motion, at five frames per second, even though the rules require three frames per second on an alarm—that's it," Sutton says. The video surveillance rules for dispensaries were initially vague, and Sutton says most security directors defaulted to using security industry best practices and designed their systems to record on motion. However, IDFPR later clarified that dispensaries would require constant recording, not motion-based.
"Now you jump up about three or four times the storage and processing power, just to satisfy that," Sutton says. "And then they went and arbitrarily pulled this number out of their back pocket that we would need to record at seven frames per second—I have no idea where that came from."
Sutton has run into similar challenges in several states.
"There are a lot of things written that don't make sense with why they were done—it depends on who contributed to writing the law," Sutton says. "They all think they are very secure and are writing the best plans, but there are some really big variants out there. Some do not have many requirements at all and leave them written pretty vaguely and open for interpretation, which has its own pitfalls, and a lot of others are so extremely specific, and I don't know where they get this stuff. They've got a lot of old technology and use terminology that's really outdated."
Morgan says this type of experience is not unusual. "With cannabis, it's still such a new industry and so heavily influenced by politics that we result in these kinds of sometimes unnecessary regulations," he notes. "The political pressures and ideology drives ridiculous regulation and laws that are based on fear as opposed to pragmatic security measures."
Regulation enforcement is a regular part of the cannabis industry, even after an organization is approved for a license. In Illinois, the state police enforce the state's regulations, while one of the two designated departments makes sure each facility is adhering to its permit specifications. Sutton says that while the inspections help prevent people from skirting regulations, they can also focus on the wrong problems.
"The Illinois Department of Agriculture comes every week and audits us against our security plan that we submitted," Sutton says. "All they care about is what we said we'd do in our application. If I said in my plan that all my cameras are going to be three megapixels and that I will have 200 days of archives, they'll come inspect those things every week. The Illinois State Police come in and audit to the actual law. They're going to make sure you have a video system that meets whatever the law says. They don't care how you're using it or that you're being effective and proactive."
Above and Beyond
These challenges were apparent to a group of people who last year started the National Association of Cannabis Businesses (NACB), the first and only self-regulatory organization in the cannabis industry. NACB President Andrew Kline, a former federal prosecutor and White House advisor, says that the organization establishes industry best practices that help cannabis businesses transcend varying state regulations and hold themselves to a higher standard.
"Professional organizations like banks and insurance companies had no idea who to do business with," Kline says. "The idea was to start a self-regulatory organization where we would vet our members and then develop national standards and use those standards as rules for our member companies. We want to demonstrate that these companies meant business, that they were trying to go above and beyond what they were required to do at the state level in terms of compliance requirements, and signal to professional entities that these businesses can be trusted, because it's a new industry and there are some actors who aren't as trustworthy."
NACB is also setting its sights to a future where the cannabis industry would be federally recognized, and a set of national guidelines would be needed. Kline says that when the organization started, it positioned itself to create best practices in line with the Obama Administration's priorities, but with the rescission of the Cole memo—which culled enforcement of the federal marijuana prohibition—and the Trump Administration, there is less clarity of national priorities.
In fact—despite the vague or overregulation issues Sutton and Morgan experienced—Attorney General Jeff Sessions suggests that many of the individual states' regulations that are on the books today are not sufficient to protect the public interest, Kline notes.
"The national standards that we're looking to build are in alignment with federal priorities for public health and safety, and as we develop them with our members, in many cases we will be more rigorous than state law to show just how serious these members' businesses are in demonstrating they are good actors," Kline says. "We're baking into our standards what we believe the federal government should care about, but there isn't as much clarity today as there was a few months ago."
The current environment of regulatory uncertainty—both at the state and federal levels—can be a hindrance to cannabis organizations, and the NACB's approach is especially useful for organizations that operate in several states with disparate regulations.
For instance, Nevada's regulations do not permit fruit imagery on cannabis product packaging, while Colorado—which has more liberal regulations than Nevada—does allow fruit imagery, Klein explains. In such a case, NACB would create a standard that would be more akin to Nevada's rules than Colorado's.
Well-researched best practices are especially important when it comes to security, since dispensaries have products and financial assets that are lucrative to criminals (see Security Management's May 2018 News and Trends department for more on how banks and cannabis businesses interact).
"Security becomes even more complicated when you're dealing with people who are taking in large amounts of cash and don't necessarily have a good place to put it," Kline says. "It's costly, particularly for companies who are operating in more than one state."
Sutton agrees that overarching guidance is needed in the cannabis industry, especially when it comes to the nuanced role of security. Those who want to start a cannabis-based organization may not know what to look for in a security director, Sutton notes, and operational security personnel may be reluctant to work for an industry that remains taboo. The cannabis industry needs experienced operational security practitioners to continue paving the way, and Sutton says he would like to see more security directors become board-certified through ASIS or similar organizations.
"I refuse to be siloed and just be the guy who is worried about video and access control," Sutton says. "I worry about it and I love it; however, there are so many other things you have to make sure you're following that do involve security. It touches everything. Security has to be at the table in deciding how you're going to operate, it's more than just your physical systems."
Morgan says he has seen a shift in the role security and law enforcement are playing in the cannabis industry. Initially, he says the Illinois State Police and local law enforcement were opposed to medical cannabis programs, but today his successor who runs the program at the state level is a former sheriff who changed his way of thinking. "He has seen the way the program works and can articulate how it's safe," Morgan notes.
"Everyone who knew me beforehand was shocked to hear that I was writing security plans for the medical cannabis industry," Sutton says. "I was the no-fun guy who was very much anti-drug and, for the most part, toed the line when it came to abiding the law. I rationalized it as making sure these companies were tight when it came to security and felt that as it was not illegal, I had no problem with it.... The turning point for me was the passion of the people in the industry and the fact that I wasn't dealing with hippies growing pot in their basement or garage. I was working with people who genuinely believed in their cause and truly considered cannabis as medicinal."
Morgan continues to help governments and businesses create medical cannabis programs and says he hopes Illinois—which renewed its medical cannabis program through 2020—will revisit some of its more stringent regulations.
"It would absolutely be fair to say that Illinois has more than enough data points to show that our regulations can be scaled back in some areas where they were overly politicized," Morgan says. "Regulations such as fingerprinting patients and the extent of security measures each facility has to have in terms of the number of cameras and other requirements. This was an experiment to see how it was working and what wasn't working well, and to improve it. And that's what's happening throughout the country."