Historic & Future Trends of Cannabis Regulation

Tyler Podcast Episode 78, Transcript

Our Tyler Technologies podcast explores a wide range of complex, timely, and important issues facing communities and the public sector. Expect approachable tech talk mixed with insights from subject matter experts and a bit of fun. Host and Corporate Marketing Manager Beth Amann – and other guest hosts – highlights the people, places, and technology making a difference. Give us listen today and subscribe.

Episode Summary

Lewis Koski, CSO, joined Metrc in March 2019 where he originally served as COO. Previously, Lewis helped build the first state agency in the U.S. to develop and implement medical and adult-use cannabis policy, serving as the director of the Colorado Marijuana Enforcement Division.

In this interview, Tyler's Alex Valvassori has a striking conversation with Lewis on how Colorado developed their cannabis regulation policies, his current work at Metrc, and what global regulation trends we should all be paying attention to.

Transcript

Lewis Koski: Academics who are doing research, etc. Like, the people that really have an open dialogue about how this is unfolding at the state level so that they can collaborate and help each other out, but also, like, to be able to formulate strategy for the future of the industry and how it's going to be regulated, especially as we start thinking through some of the things that might change if the federal government starts to experience change through Congress or the current administration.

Beth Amann: From Tyler Technologies, it's the Tyler Tech podcast where we talk about issues facing communities today and highlight the people, places, and technology making a difference. I'm Beth Amann, I’m the corporate marketing manager here at Tyler, and I appreciate you joining me for another episode of the Tyler Tech Podcast.

Today, we're bringing you a special episode featuring an interview with Lewis Kosti. The chief strategy officer at Metrc, and former director of the Colorado Marijuana Enforcement Division. In this interview, Tyler's Alex Valvessori asked Lewis, what it was like to be one of the earliest cannabis regulators in the U.S.; how Colorado developed their cannabis regulation policies; and what global regulation trends we should all be paying attention to. I hope you enjoy their conversation.

Alex Valvassori: Hi. My name is Alex Valvassori, managing director for Tyler Technologies' Cannabis Licensing Team. I'm thrilled to be joined today by Lewis Koski, chief strategy officer at metrc and former director of the Colorado Marijuana Enforcement Division. Lewis, thanks for joining us today.

Lewis Koski: Hey, Alex. Thanks for having me. Appreciate it.

Alex Valvassori: We are really, really lucky to have you on today.

For our listeners that don't know, Lewis was one of the earliest cannabis regulators out there. And so, Lewis, I'd love to start from the beginning, kind of work through your history, you know, chronologically here. And talk about when you first became involved with Colorado's cannabis program.

Lewis Koski: Well, thanks for the question, Alex. I appreciate it. So I spent, like, the bulk of my career in some form of law enforcement capacity, whether it was criminal enforcement or regulatory enforcement.

I started out. My cannabis journey actually started when I was in the Colorado Army National Guard in the summers, we would assist the sheriff's departments and some of the federal authorities who were flying over government lands in the four corners region of Colorado looking for illicit rows that were being cultivated on government's land. And so I would spend some of my summers, in between school and ski seasons flying in helicopters with the National Guard and or Sheriff departments looking for cannabis cultivations on federal lands. If we found one, we'd drop in and take them out, take them, like, basically chop them all down.

And if they were really large, sometimes we would hang out visit with the people who, showed up to cultivate them. And then not too long after that, I started a full time civilian law enforcement career. First with the Arvada Police Department where I did some drug interdiction work as a police officer working on patrol, and then subsequent to that, I joined the Colorado Department of Revenue first as a casino industry regulator. And then when we first started, the marijuana enforcement division in late two thousand nine going into two thousand ten. I was one of the first investigators to help establish that agency when we started licensing medical businesses in Colorado. I was brought in to help set up the licensing function, which I know is something that you all hold near and dear to your heart, but I was also, actively involved in helping, establish and hire the teams for the field enforcement events as well. So I did that for a couple of years.

We first started licensing businesses on the medical side. And then by the time we proved adult use cannabis, for Amendment sixty four in two thousand twelve. I'd become the chief investigations there at the marijuana enforcement division. And when we started sales, of cannabis for adult use in January of two thousand fourteen. Shortly thereafter, I had become the director of the agency and where I led a lot of the teams that promulgated all the regulations in Colorado for the first three years that the industry existed.

Alex Valvassori: That's really interesting, Lewis. And I had no idea about your background dating back to your work up in the helicopter. I'm curious when you guys would drop in on those. Was there a regulated medical market at that time where they by and large fully illegal rows?

Lewis Koski: So, you kinda forced me to date myself. This quite a bit quite a bit prior to any form of legalization. I think the first time that Colorado dipped their toe in more of a regulated legal or, like, legal market was in two thousand when there was a constitutional amendment that allowed for a very narrowly tailored allowance for medical use for serious medical conditions, and I think it was pretty loosely regulated. But a lot of the work that I did as a guardsman was done prior to that time.

Alex Valvassori: Got it. Got it. So I know in those early days, you know, around the time that you were starting as an investigator.

Things were changing very rapidly. In fact, I remember right a friend who was a student in Boulder who went away on an abroad program for a semester. When before he left, there was no presence in the dispensary really whatsoever he came back and he described it as a dispensary nearly on every corner. And so what were those early days like? I know a lot was happening very rapidly. And what was that experience like as a regulator?

Lewis Koski: Well, I mean, depends upon what time frame that was, that your friend experience that. But, you know, one thing we've learned, you know, over the last dozen or so years is that almost any unregulated allowance for medical cannabis regardless of how narrowly tailored the law is, almost always takes on the appearance of a commercial market. In fact, I can't give you a scenario where it hasn't. So even though it's like originally intended to be unregulated in small scale, for a very small portion or a very small number of ailments.

It always ends up taking on a pretty serious commercial appearance at some point. We saw that in Colorado for sure. And I think what happened, you know, probably, like, around two thousand seven to two thousand at ten, there was, proliferation of organizations or small, groups that, you know, had accumulated enough patients that they were actually putting, like, they're they were assembling fairly large cultivations, and they were starting opening up a storefronts in particular, in the city of Denver, and the city of Denver was one of the first government jurisdictions in the state of Colorado to really focus on trying to better understand the structure of those businesses, why they were getting so big, and then also starting to register and or license them.

Also, like, paying very close attention to the the use cases. And so not too long after that, you know, as Denver, you know, was one of the first to make a move on bringing them into regulated might be a little bit strong, at least, like, bringing them into the regulated fold or the government fold through licensing. The state legislature in Colorado also felt pressure to, address the fact that they're, you know, probably pretty close, like, by some estimates, like, eleven hundred different companies operating in Colorado prior to the first round of regulation and statute in, in two thousand and nine going into two thousand ten.

And so I think it's really that unregulated narrowly tailored market that had really expanded - caught governments attention. And as oftentimes happens, then government says we have to protect public health and safety. Criminal enforcements not necessarily working in this particular case. And so that we can reduce some of the ambiguity, let's start licensing these businesses and regulate them.

And so the two thousand nine legislative session, that first piece of legislation was passed and then signed by the governor going into, two thousand ten, which is the same time frame in which I transitioned from the casino regulatory agency in Colorado within the same department, which was Department revenue into the marijuana enforcement division.

Alex Valvassori: Got it. And so during that time, Lewis, thinking back to kind of that twenty ten to twenty fourteen, twenty fifteen period, you know, we started to see the emergence of a more and more regulated marketplace. We saw the transformation into the adult use market. What were some of the growing pains that you and some of your colleagues experienced. And what would you describe as some of the greatest challenges during that period of time?

Lewis Koski: Well, I think it's fair to point out that there were a lot of cities and counties in California that had taken similar action with unregulated cannabis businesses that were all, again, at the time, that time frame, we're talking about two thousand nine, two thousand ten. And before there was more of a medical allowance for cannabis.

You know, I think there wasn't any there wasn't any state programs that it had existed. So it was, like, large kinda, like, left to the local jurisdictions to kinda handle this. And I think because Colorado was one of the first states to take a look at this as, like, a statewide initiative for licensing and regulating and testing and accounting for sales, etcetera, that you know, there was there wasn't anything to fall back on to actually gain a lot of momentum. And so you know, in later adopting states, you know, past that two thousand fifteen mark till present day, there's been a lot of policy diffusion So as states like California, Colorado and Oregon, Alaska started putting together their legislative and regulatory frameworks later adopting states to kind of adopt from them things that they thought would work well in those jurisdictions.

We certainly didn't have that luxury in two thousand ten in Colorado. In fact, you know, as regulators, you know, a lot of the people who are who are in charge at that point were folks on either borrowing from liquor enforcement guidelines, which is where the first round of regulations really came from, almost, like, sometimes verbatim and or other, heavily regulated agencies. I know when I left gaming to go into cannabis, when we are looking at how we're going to license businesses, we certainly looked at some of the best practices that we used for licensing casinos in Colorado, but we also you know, looked at the a lot of the requirements for surveillance and things like that.

But we had no idea on, you know, at the time, especially going into the adult use market. So I think more like two thousand thirteen, two thousand fourteen, right after amendment sixty four, and we're creating regulations. We had all these other things that we were tasked with considering too, which included a more sophisticated testing regime of which the science had caught up with the policy at labeling help and safety for the safe production of food and agricultural products, which is also, like, lot long time been, like, you know, somewhat the domain of the federal government was not participating in all this.

And so there's, like, a number of things that I think everybody realized were gonna be really challenging, but they ended up being very challenging in terms of, like, writing the first round of legislation and writing the first rounds of regulations because there wasn't anything for us steel from that was specific to the cannabis industry.

Alex Valvassori: Yeah. Interesting. So in many ways, you guys were really writing the book on how to do this. And of course, today, new regulators and experienced regulators benefit from organizations like camera. Right? I often joked years ago that cannabis regulators really needed a support group of sorts. And now, of course, Cannra is so much more than that. How have you seen Cannra impacting the industry.

And I should clarify for our listeners - Cannra is the Cannabis Regulators Association. We actually had Jillian, the director of that association on, last year. Go check out that episode. But how have you seen Cannra impacting the industry, Lewis?

Lewis Koski: Well, it's I think it's been really impactful. I mean, conceptually when, you know, kind of still, like, refer back to those early days, you know, around two thousand thirteen to two thousand fifteen. It wasn't uncommon for myself and other regulators from Colorado to get on the phone and visit with our counterparts in Washington or Oregon. Massachusetts started to gear up same thing with Alaska.

And so early on, I think we recognize that there would be a need for an organization, where regulators could meet up and be able to share best practices, hear from other people outside of the regulated, like, the regulator community too. So, yep, businesses that are operating in the space - organizations that are focused on some of the other impacts of cannabis legalization, like consumption rates and academics who are doing research, etc. Like, the people that really have an open dialogue about how this is unfolding at the state level so that they can collaborate and help each other out, but also, like, to be able to formulate strategy for the future of the industry and how it's going to be regulated, especially as we start thinking through some of the things that might change if the federal government starts to experience change through Congress or the current administration.

So I think Cannra is like a great place for the regulators to be able to come together, but I also think it makes a great place to convene a lot of different stakeholders, which we've seen occur the last couple of years when they've had an annual event where a lot of people are invited to have a conversation about a number of different issues. And when you when they do get together, you hear a lot of the same things that I was just referring to, but also other challenges that we faced early on. This still continue to be a challenge today like digitizing supply chains and trade transparency and accountability through reporting but also testing protocols.

Like, we still really haven't figured out nor is there, like, pesticides that have an allowed use on their label for specific for cannabis. So there's still a lot of developments and things like that, you know, that we see kind of like these problems that kind of persevered since the early days until now, banking's another one of those. And then, of course, too, you know, we've seen, you know, like, what I think is largely perceived as a bit of a downturn in terms of, like, the rate of growth in the cannabis industry across the US. So these are all great things for, you know, some of the smartest and brightest people in the regulated like the from the regulator core that's currently in charge of regulating the industry, but also all of the different stakeholders that exist in that ecosystem.

And I could tell you metrc’s has been very appreciative of our opportunity both attend and speak at some of the candor events, especially given our close relationship. When and, working relationship with regulators to our customers, but also other customers that attend those events as well from the regulated community.

Beth Amann: We'll be right back to our conversation.

Jade Champion: I hope you're enjoying listening to this episode of the Tyler Tech podcast.

Cannabis regulations continue to evolve, so having the right system in place can make navigating change simple.

The cannabis industry has grown at a rapid pace and, of course, standing up in a scalable, sustainable cannabis program is impossible without the use of technology.

Many solutions have emerged to help regulators efficiently and effectively oversee cannabis markets. But licensing and registration systems are critical.

Our host for this episode, Alex Valvassori, has written a blog topic about where he explores the five things you need to know about cannabis licensing systems. Can you guess what those five things are? Find out in the blog linked in our show notes. Now let's get back to the Tyler Tech podcast.

Alex Valvassori: So, you know, I I'm glad you mentioned that, Lewis. Let's dig in a little bit to some of the work you're doing at metrc. And I guess first, you know, we'd love to hear about what brought you to metrc and kind of that transition from government to private sector. And then, for our listeners who may not be familiar, maybe provide a background for what metrc is doing in the marketplace today.

Lewis Koski: Yeah. So I'll start there with the last question. So metrc is a track and trace software system. The company itself is assisted in some form for over thirty years.

So, the founders of the company were really focused kind of mission driven research and development firm with a focus on transparent and resilient supply chains. So they had been working within various different industries thinking through and developing functionality for track and trade systems in a wide variety of supply chain. So think like whole chain, You know, they did some stuff with NASCAR for a while and a couple of other industries. And so they've been doing this for quite a while.

And then when cannabis policy started to become more permissive, and more states took on either fairly robust medical programs and or adult use programs. One of the key or, like, one of the, like, more consistent policy decisions that legislators and regulators have made is to have government administered tracking tray systems where the government administers a system that basically can, has real time reporting of everything that happens in the supply chain from the time it's little baby plants in the system all the way to the time it's a final finished product. The point of sale.

So everything, all the data that's collected along the supply chain, the growth cycles for the plants, the rooms they were in, when they were harvested, how much plant material was harvested from those plants. And then as you take test samples from some of the the batches of harvest material harvested material from plants would collect in, you know, the data on the transport of that test sample all the way to the lab. And then even when the lab answers the results in their laboratory management system, it populates in Metrc. So we also have all the data on transports between cultivations and manufacturers and distributors and testing facilities, like I already mentioned, but also store fronts as well and all the data components that are collected along those manufacturing sales processes and those various entities.

And so our system kinda sits right in the middle of the regulatory framework. The industry reports all that data into the system, and then the regulators able to monitor that and make informed decisions almost in real time. And in a lot of cases, relevant to compliance activities that businesses are or are not engaged in so that they can work with them closely to bring businesses into compliance. So we do that now in over twenty different jurisdictions. So twenty three total.

So that includes two jurisdictions, one, being in DC and Guam as part of that full we've got quite a quite a footprint across the US for sure. And we're also looking to expand beyond the US in particular, we're spending a lot of time and very focused on what's happening for cannabis legalization in Europe.

Alex Valvassori: Yeah. That it's a fascinating topic, Lewis, and I appreciate you giving us all the background there.

Clearly, you guys have a lot on your plates servicing so many states across the country. But it's interesting to hear about what's going on abroad, especially in Europe. I know as you and I have caught up over the course of the last year, so very often catch you in an airport. Not either coming and going at the countries like Germany and elsewhere.

So, tell me what you're seeing out in Europe. I know there's been some traction in Germany. There's been some recent developments.

What's going on, across the pond?

Lewis Koski: Yeah. So a couple of things I think worth noting. One is not just in Europe, but globally. We're seeing a lot of development around technology.

I mean, it's almost every day. If not hourly during every day, you hear more about chat GPT or you hear more about the AI and neural networks and a lot of the technology that's really starting to evolve over time. And so I think this is certainly peaked government officials' interest for a couple of reasons. One is, you know, I think government is always looking for ways to become more efficient in what they're doing. And so there's always an interest for them to continue to find digital solutions for longstanding public problems. And I think they're oftentimes looking towards the technology to be able to help in that. And then the flip side of that is they're also a little bit concerned about, you know, how rapidly all this technology is expanding. And so there's I've been a lot of conversation.

We know globally, you know, here in the US, but also through the European Parliament with a focus on, you know, what regulation is going to look like around this emerging technology that is just rapidly expanding and kind of like having reimagine what it might look like to see some of these emerging technologies realized over the near term. So as a technology company, as a company focused on data, all those emerging technologies are very data hungry systems, you know, and here we are. We're a system with over six billion events that that we've captured, you know, since the beginning of time for various states and states own that data, but it's still a very important and rich data set for states to be able to utilize, but we're also expanding into a region in Europe where the conversation around the legalization of cannabis is really starting to gain a lot of momentum, specifically in Germany, but also, like, other countries like the Czech Republic, Portugal, and then an and a handful of other countries that are either, you know, talking about expanding their medical programs or expanding and including adult use of some sort in their country frameworks.

So I think, like, to really sum up what's happening across the pond is you've got this, like, technology revolution that's kinda happening through these emerging technologies that are just really gaining momentum along with a conversation around cannabis legalization, which is not moving as rapidly, but certainly, you know, we always engaged in conversations on how to govern legalization. And so as a lot of those member states within the EU, are looking past, like, if they should legalize and more to the how, we've certainly been engaging in a lot of conversations with stakeholders that exist in the eco system in Europe as those things are continuing to develop.

In fact, it's entirely possible that you might see, you know, one or two governments within the European Union legalized before the US does at the federal level.

Alex Valvassori: Interesting. And in which countries do you think those might be Lewis?

Lewis Koski: I said, well, we've Germany currently has legislation that's been introduced, not passed, but introduced. That's kinda like part one, decremed bill that allows for, you know, small possession amounts for German citizens. So, or, actually, anybody over the age of eighteen, and then second allowance for small cultivation, like, small home grows, but they also have, they're contemplating a social club, what they call it nonprofit model, where in other countries, they've always been kind of termed social clubs, but, like, think of a nonprofit organization that has a limited number of customers that they're allowed to cultivate for and dispense smokeable cannabis too.

And or like a very narrowly tailored amount of concentrated products that are non, like, solvent based extraction. So think press or cold water extraction, those kinds of things. So it's it's a kind of an interesting step in that direction federally to decriminalize. You know, there's a lot of conversation around whether or not the social club model is sufficient and how quickly the coalition government that exists in Germany should act to start what they recall they're referring to as regional model projects where different regions within Germany can opt into a more commercialized scientific approach to legalization of cannabis that meet some of the requirements or the restrictions that the UN single convention tree and the Schengen agreement, which is a EU level law that that restricts cannabis to medical and scientific uses.

Germany is certainly one of those. So because they have legislation that's currently been introduced and being debated as we speak, you know, certainly they seem to be tip to taking a significant step forward towards more permissive candidate's policy in Germany, but we're seeing very similar movements in the Czech Republic where they're really pushing more for a similar framework to what Germany has, but, you know, some of the more recent conversations have been focused on more of a full scale legalization effort in the coming years. So we'll see we'll see what they come up with, and then know, there's other countries too that are expanding their medical programs.

Like the Dutch model is expanding some. We're getting a lot of potential Portugal. And then some of the smaller countries like Luxembourg and Malta, you know, they're already claiming to have adult use allowances built into their laws because they've decriminalized and they allow for home grown. So it's still pretty small.

What's really fascinating is, like, the market itself for Europe is, you know, one and a half times the size of the US, but it's, you know, probably closer to one or two billion dollars a year sales right now, all of which is medical. And so there's, you know, we see that as, you know, there being a lot of potential for growth going into future especially if governments decide to go more of an adult use model once they have a workable legal model that's not in conflict with a lot of the international trees I mentioned earlier.

Alex Valvassori: Right. Right. Well, it sure sounds like a lot going on in Europe and elsewhere. And it sounds like those first few dominoes are about to fall.

So much for us all to track here over the course of the next couple years. If we could Lewis shifting gears back here to the states, a lot has happened, especially here in the last couple weeks. There's a lot that people are talking about could happen in the next couple of months here. And what I'm referring to is the recommendation from HHS that cannabis should be rescheduled from Schedule One where it sits today alongside some of the most serious illicit drugs out there to Schedule Three that includes substances like coding and Tylenol. Of course, we're now waiting to see what the DEA is going to do with this information.

Ultimately, they have final scheduling authority. The industry seems rather optimistic, but DEA is gonna go along with that recommendation, but much is to be seen. So, Lewis, given your experience in perspective here, how do you see this process playing out? And is it possible we could start the new year with cannabis in Schedule Three?

Lewis Koski: Well, I suppose it's possible for sure, and I agree with you there's a lot of optimism around the potential of cannabis being rescheduled.

I do think there's like, you know, a fairly, like, you know, there's still process, you know, that I think could take some time. So I think, like, probably the most optimistic time frame would probably be after the first of the year. You know, but there are, you know, other schools of thought that would extend that, you know, or could extend that somewhat significantly, especially if they're for example, rulemaking required or something along those lines because there's standards in place in the federal government, of which I don't know top of my head where the they would have to notice the rules and also provide time for stakeholders to be able to comment on those.

And I'm not exactly sure how long that process might take and whether or not there might be other stakeholders outside of the industry that would hurt caution on rescheduling to something different than where it is right now. So, I mean, it could it could extend it quite a bit. So it's really kind of like almost anyone's guess, but I certainly I think what's most encouraging about it is that we're having more substantive conversation about cannabis at the federal level to the extent that, you know, we see some statements being made by how you know, like, how the administration, or HHS is expressing an openness to reschedule in cannabis.

And so I think that's really encouraging. And There's other things too. Like, at any given time, there's, like, several handfuls of bills that are in some way, shape, or form dealing with some facet of cannabis legalization. And, well, I don't know that with it, that there's anything currently introduced that is full scale reform of cannabis policy across federal government.

There's certainly a couple of different things that are out there - Schedule Three is certainly one of them, but also Safe Banking you know, is likely to receive additional consideration throughout the balance of this year and then has some potential of being able to pass but I think these are, like, on one hand very encouraging and somewhat exciting to see that the that the conversations continue to develop, but also kinda, like, tempered with the fact that it could still take a little bit of time before all of this plays out. And we might wanna get used to the idea that it'll be no incremental change over a number of months and years versus the potential of one full on reform bill kinda like similar to what we've seen in states when it comes to adult use legalization.

Alex Valvassori: Right. Right. So, you know, speaking of that incremental progress, Lewis, If you have the opportunity to speak before Congress, are there one or two things that you'd really want them to hear? Things that you think are most important that they take into consideration is as they contemplate either incremental or broader reform?

Lewis Koski: Yeah. I've seen I mean, a couple couple of things come to mind. One is that you know, just the fact that the federal government has been less involved over the last dozen years or so that then you and I have been involved in in the industry that there's been a lot of good work done at the states. And while I'd be the first to admit that the work done at the states is certainly not perfect. In a lot of ways, it's somewhat strained by the fact that there isn't a federal legalization. And I think in a lot of ways, because we're lacking federal legalization. It still gives illicit actors an avenue to still be able to conduct commerce and kind of deflate, you know, what's happening in the regulated environment with things that are happening outside of that. And so I think that would be one thing.

And then also two, you know, that it's just you know, really important that some of the best practices that have been adopted through regulations and a lot of businesses have come to comply with. Would still be relevant when it comes time to some form of federal legalization. So, for example, all the licensing frameworks that exist in the states and in all of the digitization of reporting requirements, supply chain data that exist are all worth preserving, and maybe even being used by stakeholders in the federal government level to make informed decisions about how to best help states be successful.

And then also too, I think it'd be interesting, especially early on, you know, if there's a framework that allows states to still make that decision for them instead of the federal government deciding, no, it's completely legal or it's completely legal. You know, barring some form of regulations that that states could still make a decision. So if states decide that they still are not interested in having adult use legalization framework, in their states, and they can make that decision for themselves. It's not necessarily coming from the federal government.

So, at least at least early on, because there's, like I said, I mentioned before. I think there's a lot of good work that's been done at the states that is not only worth preserving, but would really be able to help the federal government be successful in becoming a more active stakeholder in the industry.

Alex Valvassori: Right. Right. Well, Lewis, clearly, so much going on here in the states and abroad. It's been such a pleasure getting your perspective on all of these moving pieces and clearly so much coming here in the future.

So, thank you for joining us today. It's been a pleasure catching up with you.

Lewis Koski: Thanks for having me. It was a pleasure talking to you.

Beth Amann: Looking to learn more about the topics discussed today, check out the show notes for resources Cannabis Regulation Software Solutions.

Thanks again to Lewis and Alex for sharing their conversation with us. I hope you found it to be informative.

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For Tyler Technologies, I'm Beth Amann. Thanks for joining us.

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