On New Years Day, Colorado became the first state to legalize the sale of recreational marijuana. The new legislation has provoked a Denver-bound flood of "Ganjapreneurs" and kickstarted what is sure to be a very profitable pot tourism trade.
Yet the business is far less hippie and far more button-down than it appears.
The Colorado state government enforces the sale of marijuana with a set of regulations (500 pages in all) designed to shut out the black market. For one, it stipulates digital tracking of marijuana plants from seed to sale, using radio frequency identification (RFID) technology.
The cannabis industry is generally eager to comply with even the most stringent government regulations, thereby proving the marijuana market can be both lucrative and legitimate. However, implementation problems have slowed the retail pot business's anticipated boom.
See also: The Legal Stoner's Guide to Colorado's New Marijuana Law
Mike Elliott, executive director of the Medical Marijuana Industry Group, a trade association that promotes and protects Colorado's medical marijuana industry, explains that business owners who want to continue using their current sales software still need to input data into the state-operated system manually. This leads to a doubling of information, wasted man-hours and the potential for human error in recording sales transactions.
"We have to use MITS (Marijuana Inventory Tracking Solutions) and that's fine," says Elliott. "But if we want to keep using our own point of sale systems, which has been such an integral part of making the business work, it's a problem. The state system has taken over and suddenly we're not as able keep track of things internally."

Cheyenne Fox attaches newly arrived RFID tags to pot plants maturing inside a grow house in Colorado.
Image: Brennan Linsley/Associated Press
Since 2010, Colorado's medical marijuana growers and dispensaries have been required to report their plants' whereabouts to the Colorado Department of Revenue's Marijuana Enforcement Division. Earlier methods were analog and a little sloppy. The technology-reliant MITS was instituted in late 2013.
"People like MITS because it cuts down on the amount of paperwork they do," says Julie Postlethwait, a spokesperson for the MED. "The electronic manifests are automatically in our system. On the paper system, they would either email them in or fax them in, but we didn't acknowledge if we received them."
MITS was written into Colorado law before the sale of recreational marijuana was legalized. "It's an enforcement tool so that the MED knows how much marijuana is grown in the state of Colorado and where it is in the facilities," says Postlethwait. Its original goal was to digitize and facilitate the laws already on the books; the timing of the retail marijuana legalization was a happy accident.
In the medical and retail marijuana industry, marijuana plants are propagated by clipping a stem from one plant to create a new one. The new plant is issued an RFID tag with a unique 24-digit ID number, which is entered into the government's online system. When the plant is harvested, its leaves and buds are shipped to a marijuana retailer with a new RFID tag and a printed label detailing the plant's origins. The system is updated at every step of the production process.
The regulatory framework also requires 24-hour video surveillance of facilities, as well as routine compliance checks.
MITS's goal is to ensure that marijuana plants are coming from state-authorized grow facilities and being transported to state-authorized retailers, cutting off the black market. The system can also be reverse-engineered in case of contamination or illness — nothing of the sort has happened yet — by allowing the government to track tainted pot back to its seller.
"Our end goal is always public safety," says Postlethwait.

An employee trims away unneeded leaves from pot plants, harvesting the plant's buds to be packaged and sold at Medicine Man marijuana dispensary, which opened as a recreational retail outlet in Jan. 2014, in Denver.
Image: Brennan Linsley/Associated Press
As an untested and controversial industry, marijuana retailers are intent on following these regulations to the letter. However, the government system hasn't made it easy. It relies on the store's own bookkeeping records to keep track of a plant from the moment it's harvested to the moment it leaves the store, and these two sets of software are mostly incompatible.
According to Elliott, around 500 marijuana retailers have been registered in the state of Colorado, along with 126 infused product manufacturers and 700 growers. Not all of those retailers were able to open their doors on Jan. 1, though: Weather delays and the holiday season meant some retailers did not receive the tags in time to open on "Green Wednesday," and implementing the new system requires time and training.
There have been complaints about the cost as well: $0.25 to $0.45 per RFID tag, depending on type, and the tags are not reusable.
Most significant is the state-mandated system does not integrate with the tracking and point-of-sale software medical marijuana dispensaries have been using to keep tabs on their products for years.
"Point of sale companies like MJ Freeway and BioTrack have very good, developed systems," says Elliott. "They've been very user-friendly. That's the biggest rub, though — the new system is not communicating with them. You have to manually input data a second time: once for the state's program and then again for this other system."
Doubling up inventory calculations not only means wasted man-hours, it leaves room for human error, Elliott says. The smallest mistake in calculating or inputting weights and quantities can be critical. (A medical marijuana facility that stocks more pot than what its patients require faces fines and penalties.)

Employees trim pot plants to be sold at Medicine Man marijuana dispensary in Denver, Friday Dec. 27, 2013. Medicine Man was among the first batch of Denver businesses to receive a license allowing them to legally sell recreational marijuana.
Image: Brennan Linsley/Associated Press
The state government acknowledges its frustration, and Postlethwait says the state's RFID tag manufacturer, Franwell, plans to evolve its system to work in tandem with sales software. However, she can't specify when that might happen.
"We were always very open that [MITS] was something we were going to develop," she says. "We always said, 'If you want to buy software to do your point of sale, that is a business decision you're making on your own.'"
The regulatory challenges don't end with RFID. Marijuana businesses are almost exclusively cash-only, which makes precise auditing of store transactions a long process with potential for error. Retailers face stringent packaging regulations — on par with prescription drugs, says Elliott — and it has been difficult for manufacturers to meet their needs. Plus, stores that sell both medical and recreational marijuana face extra hurdles in complying with differing regulations for each business.
As a whole, the cannabis industry is striving to remain totally compliant with the state government's regulations despite the challenges. It's an industry under the microscope, after all, and what happens in Colorado over the next few months and years will likely affect federal and state governments' stance on legalizing marijuana. So despite the hiccups, "we're very supportive of the seed-to-sale tracking program," says Elliott. "It's helping to bring legitimacy, transparency, accountability to this program."
Elliott suggests the industry is simply experiencing growing pains as it evolves. He adds, "We're not coming anywhere close to meeting demand."
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