The marijuana industry still operates in a legal limbo but is beginning to emerge from the underground as a big business. InvestinCannabis.com wants to leverage IT to help the nascent industry grow, including helping medical marijuana dispensaries to comply with HIPAA.
Pot has been a big business for decades, but with the recent liberalization of marijuana laws it is beginning to emerge from the shadows to become a legitimate business opportunity. Invest in Cannabis wants to help it move from a paper-and-cash operation to a modern industry taking advantage of IT.
Twenty-six states and the District of Columbia have liberalized their marijuana laws to some extent, but with federal laws criminalizing pot still on the books the industry now is operating in a kind of legal limbo under benign federal neglect. “There are many gray areas and inconsistencies,” said Invest in Cannabis CEO Eddie Miller.
One of those gray areas is the Health Insurance Portability and Accountability Act (HIPAA). Although laws on recreational use are easing, medical marijuana still is the larger market for quasi-legal sales. Although these sales remain technically illegal under federal law, dispensaries probably must comply with HIPAA—at least once they begin doing electronic transactions or record keeping. It is admittedly a gray area and there is some disagreement about whether HIPAA applies, but any dispensary that keeps data on a computer or uses a point-of-sale terminal probably should be thinking about compliance.
And as the emerging market for recreational pot grows, dealers and suppliers who want to grow with it will have to adopt modern retail and financial technology to operate their businesses. To date this shift has been hampered because federal laws have kept banks and investors away from the industry. This is beginning to change, however, as federal regulators have said they will not enforce drug and money laundering laws against banks doing business with otherwise legal dealers.
But where does a dealer go to get a PCI-compliant POS terminal or HIPAA-compliant hardware, software and services? That’s what Invest in Cannabis is for. “We provide the technology layer at all points” in the industry, both business-to-business and business-to-consumer, Miller said.
The stakes are high. Legal pot sales in the United States re expected to approach $5 billion this year, and that is a drop in the bucket of illegal sales, which are estimated at $65 billion a year. If the trend toward liberalization continues, more of the illegal sales will be shifting to the legal side and those businesses that get into the market early can become the dominant players in a multi-billion-dollar industry. Invest in Cannabis provides an online platform to bring together businesses, investors, vendors and service providers to help create market leaders.
Despite the big numbers, there is still a dearth of information about the marijuana market. Retailers have little reliable data about demand and customer demographics, which creates a disconnect between the producers and consumers, said CTO Boris Tsibelman. The company wants change that. “We help the businesses make their decisions based on data, and we help gather that data.”
Is the financial capital available to support the technology investments that Invest in Cannabis wants to enable? As the trend toward liberalization at the state level and benign neglect at the federal level becomes clearer, capital is starting to materialize, Miller said. $300 million in capital investment for marijuana was raised last year. “But it is still nascent,” he said.
The emerging marijuana industry includes not only dealers and growers, but the full complement businesses and support services, from head shops and smoke shops to packaging and supply manufacturers, cultivation equipment suppliers, consultants and programmers. And all of them will need professional services.
Whether investors are getting in on the ground floor of a growth industry or legal marijuana turns out to be a flash in the bong, it will be interesting to follow the development of the cannabis IT market.