Last week, the Cannabis Regulators Association (CANNRA) held an external stakeholders meeting in Minneapolis, Minnesota that brought the nation’s cannabis dealers (i.e. the regulators) together to commiserate with 175 “attending organizations” that represent the interests of constituencies within the cannabis and hemp industries or are members of the science and data analysis communities. One media outlet, Politico, was permitted to attend, per the list.
Yes, I just referred to regulators as weed dealers, but it’s not a terribly original idea. It was actually mentioned to me several years ago by Fiona Ma, a longtime supporter of banking for the industry who is now California’s Treasurer. At the time, she worked for the state Board of Equalization collecting taxes on, among other things, cannabis sales, which, she joked, essentially made her the biggest weed dealer in the nation as far as the feds were concerned, with only the Cole memo standing between them and her. It was funny and mentioned in passing, but I never forgot the quip, and when California dispensary owners started complaining en masse that the triple-whammy of restrictive regulations combined with taxes on top of taxes had turned them into little more than bag men for the state, it seemed clear even back then that the role of the traditional dealer was not being eradicated by the government as much as usurped, and that it was not an accident but according to plan.
CANNRA does not envision itself as an usurper or dealer, of course, but as an association made up of state regulators whose job is to manage the transition from an unregulated cannabis market to a regulated one, its members are literally tasked with creating a new industry on the bones of the old one. This is accomplished by removing the old cannabis dealers (i.e. criminals) who set the previous rules of the road and replacing them with regulators whose new rules of the road come with taxes that are specifically calculated to mirror the profit margins of the criminal dealers. As a strategy, it is simple and straightforward, but as we have seen in market after market, it is far easier said than done, especially when the newly deputized dealers are as clueless about cannabis as the previous dealers were knowledgeable.
But, to continue flogging this analogy, today’s new dealer is also a bureaucrat who has been hired by elected officials to develop and supervise the transition from illegal to legal. Whether that means that the elected officials are effectively members of a criminal conspiracy to traffic a scheduled controlled substance or not, no one appears to be headed to jail, and the new dealers are so reassured in their apparent autonomy that, unlike their dealer forbears, they are emboldened enough to hold meetings in public – though not open to the public – with agendas that state their intention to establish uniform policies for cannabis despite the fact that no federal cannabis regulators exist yet.
CANNRA outlined the meeting’s agenda in promotional material: “The purpose of our 3rd Annual External Stakeholder Meeting is to bring together a diverse array of national and international stakeholders from across the cannabis, cannabinoid, and hemp space to engage in discussions with CANNRA member regulators and other attendees on regulatory and policy topics.”
To that end, the meeting was open to national and international stakeholders only, and “no state-level or provincial-level trade associations or coalitions are eligible to attend.” There were other specific requirements for eligibility, per the rules:
To be eligible to attend the CANNRA External Stakeholder meeting, individuals must:
Be representing an organization, entity, association, or company that is engaged in cannabis, cannabinoid, or hemp policy, regulation, research, or advocacy at the national or international level; Not be attending as a representative of a plant-touching entity or state/provincial/federal cannabis or hemp licensed entity; and Not be attending as a representative of an entity manufacturing or distributing tobacco, alcohol, or pharmaceutical products.As the list makes clear, associations representing disparate stakeholders in the industry attended the meeting, which had the stated goal to “purposefully seek to avoid an echo chamber and seek to engage in discussion with organizations that have differing viewpoints,” but only a select few were invited to speak on panels, which were mostly moderated by CANNRA members. The remainder of attendees – which included craft growers, indigenous communities, patients, veterans, and social equity applicants, among others – were left essentially voiceless. That has apparently become a common theme for attendees over the years. We were told by one attendee that the exclusion of certain people from even attending the meeting has become so obvious over time that it can no longer be seen as unintentional. As a result, CANNRA itself is increasingly seen as a biased entity that caters to a select group of industry stakeholders with which it is aligned in terms of policy at the federal and state level.
And while it is safe to say that most stakeholder groups in attendance were happy to be there, because it meant they were less likely to be on the menu, a CANNRA event is not really a meeting of equals who are coming together to find ways to work toward common goals. Dealers do not cede control to stakeholders. In this case, they may be willing to listen and learn – because they know they are learning on the job – but they will never unilaterally cede control of the cannabis space, for the simple reason that no dealer in their right mind would do such a thing, even or especially if the dealer is also the government.
What is CANNRA?
CANNRA is a self-described “nonpartisan association of government agencies involved in cannabis and cannabinoid regulation” whose purpose is “equipping regulators & policymakers with essential information from jurisdictions regulating cannabis & cannabinoids.”
It adds, “Our mission is to convene, educate, and support governmental jurisdictions responsible for implementing cannabis and cannabinoid policies and regulations. We do this by fostering collaboration and coordination to identify and share best practices that safeguard public health and consumer safety, promote equity, and create regulatory certainty for industry participants.” Members and associate members come from more than 45 states and U.S. territories, Canada, and the Netherlands.
According to its website:
CANNRA’s work is largely focused on supporting member jurisdictions through:
Policy tracking efforts to facilitate members understanding of policy approaches being implemented in other states and territories
Identification of emerging and best practices through topic-based committees that meet regularly and develop reports and other resources
Education about key regulatory topics and on the ground regulatory challenges through fact sheets and topic summaries
Exploration of emerging and complex policy and regulatory topics as part of a monthly member-only webinar series
In-person convening of CANNRA members and national stakeholders to facilitate an exchange of ideas and information
Lobbying is not mentioned, but CANNRA is designated
It states elsewhere, “To be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). For example, an organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community and, therefore, does not qualify as a section 501(c)(4) organization.”
Notably, taxes cannot be deducted for donations to a 501(c)4, but it is permitted to engage in lobbying. “Seeking legislation germane to the organization’s programs is a permissible means of attaining social welfare purposes,” states the IRS. “Thus, a section 501(c)(4) social welfare organization may further its exempt purposes through lobbying as its primary activity without jeopardizing its exempt status. An organization that has lost its section 501(c)(3) status due to substantial attempts to influence legislation may not thereafter qualify as a section 501(c)(4) organization. In addition, a section 501(c)(4) organization that engages in lobbying may be required to either provide notice to its members regarding the percentage of dues paid that are applicable to lobbying activities or pay a proxy tax.”
It was in fact expressed to us in no uncertain terms by an attendee to last week’s meeting that “CANNRA is a lobbying group. It’s a (c)4. They got together so they could lobby.” But CANNRA appears to downplay its lobbying efforts. According to its full filing for the fiscal year 2022, the association only made ‘in-house lobbying expenditures of $2,000 or less,” and no other lobbying expenditures are reported.
CANNRA also outsources all operations to The Council of State Governments (CSG), “the nation’s largest nonpartisan organization serving all three branches of state elected and appointed officials. The mission of CSG is to champion excellence in state government.”
Per its IRS filing,”CANNRA [PAYS] THE COUNCIL OF STATE GOVERNMENTS (CSG) A MANAGEMENT FEE TO PERFORM AN AGREED UPON LIST OF SERVICES. CSG PERFORMS MANAGEMENT DUTIES OF CANNRA, INCLUDING FINANCIAL MANAGEMENT, LEADERSHIP, FUNDRAISING, MARKETING, AND OTHER MANAGEMENT SERVICES. IT IS CSG’S RESPONSIBILITY TO HIRE EMPLOYEES AND DETERMINE COMPENSATION. CANNRA IS NOT PRIVY TO THIS EMPLOYEE COMPENSATION.”
The filing also states, “THE ORGANIZATION’S MANAGEMENT COMPANY, THE COUNCIL OF STATE GOVERNMENTS, (CSG) HAS THE FULL POWER, AUTHORITY AND RESPONSIBILITY TO EMPLOY, TRAIN, SUPERVISE, EVALUATE, AND DISCHARGE STAFF. ALL WAGES, COMPENSATION, AND BENEFITS PROVIDED TO STAFF ARE DETERMINED BY CSG AND ARE BASED ON QUALIFICATIONS AND JOB PERFORMANCE ASSESSED ANNUALLY. CSG MONITORS AMERICAN SOCIETY OF ASSOCIATION EXECUTIVES INDUSTRY MEDIANS FOR TRADE ASSOCIATION COMPENSATION.”
CANNRA revenue for 2022 was reported to be $707,000, with expenses of $430,000, and total assets of $377,000. 2022 saw a significant increase in revenue over 2021’s reported revenue of $155,960, expenses of $55,758, and assets of $100,202. Per the filings, CANNRA officers and board members do not receive any compensation. 2023 numbers have not posted yet.
With revenue like this, CANNRA is not wielding any influence through dollars spent, and yet it remains a fulcrum of activity that attracts the attention and attendance of the largest companies in the industry, whose direct representatives were seen at the meeting in addition to the advocacy groups and/or law firms that likewise represent the interests of these same companies.
Another dynamic at play was that many of the people attending and speaking at this event as external stakeholders are not only not new to cannabis, but some were themselves cannabis regulators in programs that are trying to find a path to functionality to this day. Some of the people made moves in the other direction as well, snapping up gigs in new markets as they opened up. It was hard to deny that the revolving-door of employment was in full swing, as was the prospect of being able to fail upward. Nice jobs if you can get them.
Why is CANNRA?
While the effort to begin setting the regulatory stage for national and international cannabis markets may be a worthwhile project, for CANNRA specifically, it could be interpreted as whistling past the graveyard. One only has to look at the abysmal condition of many of the state cannabis programs whose leaders were at this meeting. These include programs whose executive leadership is in utter disarray, or has quit or been replaced, or whose employees have been accused of acts of retribution against companies and labs, or programs that have allowed corruption to proliferate, or looked the other way when people died on the job, and yes, even programs that put patients’ health at risk. Is it not reasonable to ask how CANNRA can begin to consider national or international issues when it has failed to fix the systemic issues plaguing the very states that make up its membership?
Questions about CANNRA’s motives are not limited to frustrated attendees. The association has been accused of using its position as an arm of the government to influence federal legislation to the benefit of certain segments of the industry. In an article published in September on cannabusiness.law titled, “Is CANNRA the New Face of Cannabis Prohibition?” attorney Rod Knight makes the following case against trusting CANNRA:
“CANNRA’s stated mission is, ‘to convene, educate, and support governmental jurisdictions responsible for implementing cannabis policies and regulations.’ Unfortunately, CANNRA is playing out its mission by attempting to restrict the expansion of cannabis and to protect its members and the multinational corporate interests that its members regulate. With most Americans now favoring widespread access to cannabis and a broad cannabis industry emerging in the form of hemp, both of which it opposes, CANNRA has emerged as the new face of cannabis prohibition.
“This brings us back to the 2018 Farm Bill’s successor. On September 15, CANNRA sent a letter to Congress calling for ‘modifications to the Farm Bill to address hemp-derived cannabinoid products.’ These proposed ‘modifications’ are mostly draconian and anti-hemp, which is to say anti-cannabis. I encourage you to read the letter, which can be done by clicking here or below. In particular, CANNRA proposes a new definition of ‘hemp’:
“The term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, whether growing or not, with a total tetrahydrocannabinol concentration of not more than 0.3 percent in the plant on a dry weight basis. The term ‘hemp’ does not include viable seeds from a Cannabis sativa L. plant if that plant exceeded a total tetrahydrocannabinol concentration of 0.3 percent in the plant on a dry weight basis.
“In summary, if enacted, CANNRA’s proposed definition of “hemp” and its other proposals would destroy thousands of small and mid-sized legal businesses, end the jobs of many thousands of employees of hemp businesses, terminate the end markets that hemp farmers rely on for their crops, remove legal access to cannabis from millions of Americans, and preserve a monopoly by a handful of multinationals on a plant that is easily grown and which should be (and is currently almost) fully available to most people. Rather than scrapping dysfunctional state-level marijuana regulations and focusing on reasonable federal level regulations for hemp that ensure quality and age-gating, CANNRA has decided to double down to preserve its turf and the small but powerful group of companies it regulates. This is short-sighted and decidedly anti-cannabis.”
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