Note: This blog appeared on the Falcon, Rappaport & Berkman website.
The blockchain and cannabis industries are two of the newest and largest markets to emerge in our lifetime. Both blockchain technology and the cannabis industry have reached new highs in recent years, but both are facing difficulties in 2023. The blockchain industry remains largely unregulated and is currently recovering from several high-profile scandals. Still, the value and underlying utility of blockchain tools cannot be understated. Its true potential as an unchanging database has hardly been tapped into, particularly as it relates to data recording and security tools.
The cannabis industry has seen its own struggles, as a lack of federal progress has hurt industry funding and disrupted publicly traded companies. The lack of significant banking options, difficulty in payment processing, tax and financial burdens, and lack of regulatory clarity have required cannabis businesses to go above and beyond to simply survive.
But what if these two industries could help one another – could utilizing blockchain potential and tools in the cannabis industry help both fields reach their full potential?
A Digital Transformation
Despite the aforementioned struggles, the legal cannabis industry is expected to exceed $100 billion dollars by 2030 (Grand View Research, 2022) with the blockchain technology market potentially exceeding $130 billion dollars at the same time (Market Research Future, 2023).
Cannabis is not legal on the federal level, which leaves States that have legalized cannabis solely responsible for ensuring quality control and transparency. Further, a lack of oversight of these fractured markets often results in safety concerns, particularly as cannabis businesses typically transact on a cash basis, leaving them vulnerable to robberies and other frauds. Bad actors in the industry may also divert cannabis products from legal programs to the illicit market, avoiding the otherwise high taxes.
Blockchain usage in the cannabis industry has the potential to remedy a number of these issues. Blockchains are immutable ledgers that can allow for tracking across supply chains, helping to ensure proper quality controls and preventing legally produced cannabis from entering unregulated markets via detailed storage recording. Blockchain technology can even help alleviate some issues associated with payment processing, with the use of cryptocurrencies allowing for fewer cash transactions (which can help to prevent theft).
Better for Everyone
The cannabis markets can greatly benefit from blockchain data recording, as well as blockchain-based monetary and security tools. The long-term success of blockchain technology will likely depend on its integration with other industries, which would allow for significant utilities across nearly all markets.
Already, cannabis businesses are integrating blockchain technology and tools to verify plant authenticity and lab results. Some businesses also utilize blockchain-powered cryptocurrencies specific to the cannabis industry, allowing for cashless transactions. Further utilizing blockchain technology in the cannabis industry could help both industries take the next step toward realizing their respective potentials.
These emerging industries are still in their early stages, and collaboration between them could prove to be an incredibly fruitful endeavor down the line. The constantly evolving nature of both industries means that navigating appropriate rules can be quite difficult. In order to fully understand the legal liabilities of involving blockchain technology in the operation of a cannabis business, operators should seek appropriate attorneys for blockchain and cannabis-related matters.
Terran Cooper and Michelle Kabel both contributed to this article.
DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.
With over 30 years of experience in the area, Andrew’s healthcare practice includes representing various cross-sections of healthcare providers including physician groups, hospitals, physician/hospital organizations, independent practice associations, diagnostic and treatment centers, office-based and ambulatory surgery centers, effectively acting as general counsel in all aspects of business operations including transactions, employment, human resources, and litigation matters.
Andrew’s cannabis practice includes a full range of legal and consultative services in all areas of cannabis law. These include licensure preparation, applications, and strategy, business planning, industry segmentation, establishing partnerships and joint ventures, branding and intellectual property, real estate, regulatory compliance matters, and industry advocacy. He works with healthcare professionals, canna-business entrepreneurs, municipalities, caregivers, patients, and others in handling all aspects of the emerging cannabis industry. Andrew has assisted clients in obtaining licenses in numerous states in both competitive and non-competitive licensure processes.
