Header Image – Author, Lawyer Christine Baily
Cannabis businesses developing new products face a significant challenge: navigating evolving state regulatory compliance standards.
For a cannabis business, one potential risk of new product development is that state regulators will determine the new product does not comply with existing standards.
Even if a business develops a product that satisfies current standards, there is always a possibility the regulator will change those standards.
Marijuana businesses pursuing product development have the option to challenge regulatory requirements and enforcement actions that undermine innovation.
Enforcing regulations
State regulators’ authority to set standards for licensees comes from their legislatures.
In emerging industries such as cannabis, where there’s a high degree of uncertainty and potential risk to the public, regulators often have broad authority to establish and enforce rules.
For instance, state regulators might have extensive regulatory powers – including the ability to issue licenses, promulgate regulations, conduct inspections and enforce compliance.
While this broad authority is necessary to protect public health and safety, it also can hinder marijuana businesses’ ability to innovate in an increasingly competitive industry.
Because of the limits on their authority, regulators cannot arbitrarily set or enforce compliance standards.
To ensure transparency and fairness, regulatory agencies must follow rulemaking procedures when issuing new regulations.
For instance, they often are required to publish proposed regulations in advance, provide opportunities for public comment and hold hearings before finalizing rules.
Even when there is a need for an emergency regulation, the regulator likely needs to provide a notice and comment period soon after the regulations are issued.
In some states, officials also must hold a public hearing.
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