Applications and Use Cases

How Blockchain Can Curb Illegal Cannabis Sales


October 11, 2021

With states across the U.S. continuing to legalize recreational and medical cannabis use, cultivation, distribution, and consumption are on the rise. As this plant becomes more widely accepted and decriminalized, many new businesses are being created born of its trade.

This industry is on fire, generating billions of dollars in revenue for economies around the country. But, with such rapid growth, operational hiccups are to be expected. Moreover, as regulations vary from state to state, tracing and tracking cross-border commerce is complex.

Chris Roberts reports in Forbes how, “Audacious rule-breakers are gaming California’s supposedly strict ‘track-and-trace” system and are diverting ‘untold millions of pounds’ of legally grown cannabis to the illicit market across the country, a recent lawsuit alleges.”

In California, cannabis changes hands multiple times between grower and consumer. Roberts explains that this results in a ‘burner’ distributor – often a phony straw man operation – buying cannabis from a legitimate grower and paying state cultivation taxes, then selling the legal cannabis on the illicit market.

“In theory, the state could take a look at the ‘track-and-trace’ data and see exactly who is skirting rules. But breaking up this arrangement would crash the whole edifice,” according to Elliot Lewis, CEO of Catalyst Cannabis Company, which filed a lawsuit on Sept. 15 against California’s Department of Cannabis Control.

Why California Regulators Should Consider Blockchain for Cannabis Tracing

With blockchain, cannabis movement can be traced from growers to distributors to dispensaries to consumers who purchase their products. Blockchain records are immutable and cannot be changed. This would prevent illegal suppliers selling products under false pretenses and black-market dispensaries from illicitly sourcing product from cultivators out of state.

Distributed Ledgers provide an unparalleled level of transparency and trustworthiness in data tracking; immutable records would address current systems’ inability ability to trace cannabis products at each stage of cultivation, transportation, distribution, sales, and taxes.

The inability to track Cannabis shipments between growers and distributors in California is an issue that needs solving. Using blockchain, regulatory agencies could monitor Cannabis distribution channels in real time. The advantages for law enforcement are obvious: hyper-precise, real-time inventory tracking.

For cannabis growers and the retailers to whom they sell their goods and services, maximizing product shelf-life is especially critical. Solutions that combine blockchain with IoT and analytics could also measure and optimize storage and delivery facilities based on data intelligence.

In addition to inventory management, intuitive dashboards present visualizations that identify operational inefficiencies, making it easy for producers to understand why and what steps will prevent future bottlenecks.

Marijuana legalization is at a tipping point. For states, entrepreneurs, farmers, and the national economy, ensuring the integrity across the cannabis value chain – from seed to sale – is essential. Regardless of whether you’re pro cannabis or against it, jeopardizing the economic opportunities of this multi-billion-dollar industry would be catastrophic.

CannaTech Expo, taking place February 8-11, 2022 in Fort Lauderdale, Florida, is the first technology-focused event highlighting the solutions to support this rapidly growing and evolving industry.  From seed to sale, CannaTech Expo will deliver education and networking opportunities to support businesses across this emerging sector.




Edited by Erik Linask

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