Justice Cannabis Co. is one of the largest private multi-state operators in the United States. Founded on the premise that feeling good is always the destination, the team at Justice has a long-standing and impressive reputation for quality products, unique dispensaries, and a modern approach to service.
In this episode of Cannabis Matters, we caught up with Gary Seelhorst, the company’s Senior VP of National Compliance and Government Affairs Officer to learn more about the rules and regulations inside the not-yet-federally-legal cannabis industry.
Watch his interview with ForceBrands’ Client Strategist and series host Eric Rosen and read the transcription of the conversation below:
Gary Seelhorst: As a compliance officer, I’m going to shut it down.
Eric Rosen: So it’s the compliance version of the grandmother test?
GS: Correct. That’s a good way to put it, yeah.
ER: Welcome to Cannabis Matters. I’m Eric Rosen and I’m here with Gary Seelhorst of Justice Cannabis. Gary, thanks so much for carving out time to do with us today.
GS: Absolutely. It’s a pleasure to be here.
ER: So, walk us through your background. How did you come to be in cannabis and specifically, how did you wind up on the compliance side of the industry?
GS: My career kind of started more on the pharmaceutical side. I was a clinical scientist for years. I’ve worked on a lot of the earlier and kind of mid-stage drug trials. I designed a lot of those. And then I was more interested to work maybe more on the transactional side so they paid for my MBA and then I moved more into sort of corporate compliance and really more like the due diligence, transactions, licensing, and M&A and a lot of that side, so I was dealing a lot with FDA regarding FDA compliance so having kind of that background you know with a sort of a highly regulated industry I think resonates well into this industry. After Pfizer, then I I started working for some startups and I was working kind of more on the regulatory side because with smaller pharmaceutical and medical device companies, you’re on a pretty strict regulatory path and usually what you’re doing is having a series of meetings with the FDA so you sort of have a road map and you’re hopefully taking off some of these check boxes that they’ve given you on the way to regulatory approval, so there’s always a compliance component with how you’re conducting a lot of your studies and your operations and making sure that that’s compliant with a lot of the FDA regulations that they’ve set forth, which have kind of been in place for about you know 50-75 years so it’s different in the fact that it doesn’t change a whole lot. There are ticks here and there that happen, but for the most part, it’s a lot different from cannabis in that cannabis changes frequently. It just became such a fascinating, interesting industry to me and that’s why I was all in.
ER: Gary, tell us a little bit about Justice Cannabis and sort of where you sit in the space and what differentiates it.
GS: We’re in different states. We’re vertical in some, retail in others. We originally were Justice Grown and we have a lot of folks that really have a lot of expertise from the cultivation space and then we started to pull a lot of folks in from more of the branding and extraction space, too, so we have a lot of expertise there. We have really good practices in place and a lot of the brands that we’re starting to push out now we’re getting a lot of really good feedback.
ER: As you’re working alongside politicians and government agencies, what are some of the more topical conversations that you find yourself having as it relates to wider-spread legalization?
GS: The one I think that sort of looms large that’s talked about but there’s not a whole lot being done right now is interstate commerce. And I think people talk about it as though it’s just a flip of the switch and it’s far from that. You’ve got a lot of these different states and a lot of legislators in those states that have really kind of put a lot of their credibility into the industry of cannabis and you then have these tax revenues that are associated with that and that’s a lot of their reputation that’s on the line and if you’re going to disrupt any of that tax revenue, they’re going to have an issue with it so it’s going to be a phased approach when that happens. There’s probably going to be a few test cases where you have maybe tripartite agreements with three different states and then you figure out if maybe it comes from one state and then it retails in another state, how to basically split up the taxes like that. And then they might start it out regionally a little bit more and then maybe a full widespread federal legalization but then you’ll probably have a federal tax that’s imposed as well. So, it’s not a real easy issue to fix so to speak and I think you’ve got a lot of people that are weighing in on this that have differing opinions on how that should happen and differing timelines more importantly, I think, so I think that that’s one thing, once they can kind of figure that out, you’re going to have a kind of a completely different landscape on there’s probably gonna be more regionality as far as cultivation and then certainly a lot of different types of proclivities that the customers will have in different areas as well as we have already seen.
ER: From a collaboration standpoint, what do you see as the biggest opportunity for cannabis brands to lean in on the policy front as the industry continues to evolve and mature? Is it interstate commerce? Is it safe banking?
GS: Well certainly those two I think are big parts of it. Intellectual property is always kind of a big asset that you can have as a kind of a CPG kind of company, but it’s hard to really navigate right now because the USPTO, the U.S Patent Trademark Office, is a federal agency and it’s federally illegal so what a lot of people I think are doing is trying to put their stake in the sand with them ahead of time and then filing somebody’s state intellectual property filings as well and I’m not exactly sure how that’s going to finally work its way out but I think early on you saw a lot of these sort of cultivators and and extractors trying to kind of put together these method patents as well and I think those kind of proved to be probably not as valuable as they they once thought because all you have to do is just kind of switch one thing up in the protocol and then they’re unenforceable, but I think once that finally kind of works its way in, the winners in this industry are going to be the ones that have developed really good high quality brands and if you can get some intellectual property around that those are the people that’ll win the day.
ER: How do you and the team of Justice stay ahead of the curve with respect to future-proofing your strategies around marketing, packaging, the things that are sort of subject to change from a regulation standpoint?
GS: Yeah that’s where I think it really helps to be a part of a lot of these trade groups and you can really start to see where the puck is going and you see trends that are happening and then you also can kind of work through a lot of the legislators that are out there as well that kind of want to see what’s best for the industry and then put together bills that are going to help out with the industry, if it’s going to be something like Canada’s financing reform or if it’s going to be packaging. Eventually, everything is probably going to open up more from an adult-use standpoint, so you want to make sure that your company’s going to be nimble enough to make some of those switches, not only just kind of with your packaging but also your branding and the way you’re sort of reaching out to a lot of your patients and customers, too.
ER: How does Justice think about balancing the right amount of called legacy cannabis acumen and outside traditional CPG acumen to make sure that you have the right mix for the organization at any given time?
GS: There are a couple different ways I can answer that question too because you’ve got operators that really have a good understanding of not only just the sort of the operations of cultivation and manufacturing but looking at a lot of the genetics and how the genetics play a role in how you set up your genetics locker in the different brands and the products that you’re putting out and a lot of those genetics come from that legacy market. You see a lot of cross-hybridization as well and I think as a lot of these folks start to embrace the legal market, you start to pull them in after a certain amount of correspondence and trust that you have with those folks, and honestly, I still think a lot of those genetics are going across state lines and that happens and some of the states are clamping down on it but I think some of them also kind of look the other way, too.
You mentioned a healthy balance and it’s really going to be different for every company based on really what their comfort level is with the product mix that they have and maybe looking at — so a lot of the states are now starting to allow for a certain time period where you can bring in some of those genetics if you’re brand new and you’re just starting your cultivation operations, they’ll give you a 30-day window where you can transfer over state lines. Pennsylvania has that. We took advantage of that certainly. Sometimes we’re dealing with some of these operators that are straight out of the legacy market just because they have such great stuff but you know it’s all compliant exactly what we’re doing and everything’s tracked and traced once it comes to us so we’re happy to indulge everything that we think is what’s best for the industry and if we have any questions about it, we’ll go straight to the regulators and say, hey look, this is something that we’re considering, what do you guys think about? And if you’ve built up that level of trust with the regulators, they’ll answer you. They’ll be timely with a lot of their communication because they understand that there is that need so I think what’s most important is just understanding how much of that you really want to incorporate into your company’s brand as well because I think some legal companies still kind of do lean into a little bit of that legacy feel, especially in California, Oregon, Washington some of those folks and others I think want to maintain that much different feel and appeal according to that sort of that disposition.
ER: What advice would you give to new brands that are entering the space today and tomorrow?
GS: Yeah so definitely come in with an ample amount of capital and I know that’s not an easy ask right now but I think folks that come in thinking that they’ll bootstrap, you know I think that’s fair if you have a decent amount of capital to start with and you’ve really streamlined your operations from the beginning but you definitely want to have some reserves because you’re going to get hit in the mouth as the philosopher Mike Tyson says. It’s like you come in with a plan, everyone’s got a plan until they get hit in the mouth and in cannabis you get hit in the mouth a lot. There are supply issues, there are people not paying you back, there are banking issues, and there are regulations changing all the time and you have to think to yourself if you’re not okay being in a place where there’s a lot of uncertainty, it’s probably not the best business for you and that starts with capital. Make sure that your capital requirements are fairly locked in.
ER: This industry moves incredibly quickly, so while no one has a crystal ball, if you fast forward three years or five years, what does the space look like then compared to today?
GS: I’ve been asked that a lot over the last four years and I wouldn’t have said what I thought four years ago how it’s going to be right now and really you kind of have sort of a near-term and a longer-term view of it, too. I think if we could see something where they really have like a comprehensive cannabis finance reform that’s really going to open things a lot in the industry and that’s sort of better access to capital, even short-term loans, the 280E decoupling I think is gonna have a really big effect and then you know credit card transactions everything else, I think you get a much different look of the industry post-federal legalization. So, if you go to sort of three years, I still don’t think you probably have federal legalization but we have other singles that we’ve probably gotten along the way. The long-term is really kind of what we saw in the beginning when we thought federal legalization was imminent is you’re going to start to see a lot of these larger CPG companies that are going to probably take over but I think they’re all sitting on the sideline right now sort of doing a wait-and-see and understanding. I think when they were first coming in and starting to do some of these transactions, I just don’t think they had any idea what was coming forward. I think they thought it was just going to be another transaction like they’re accustomed to and then they understood it’s a whole different ball of wax.
ER: Gary, it’s an absolute pleasure to have you on the program today. It’s always a pleasure to connect and here’s to all of your ongoing success in the months and years to come.
GS: Absolutely. Right back at you, Eric. It’s always great to talk to you. You’re a great mind in the industry as well and I like what you’re doing with this platform so I’m really happy to be a part of it. We’ll support it however I can in the future, too.
Catch up on more episodes from Cannabis Matters here.
Interested in learning more about the cannabis industry and how ForceBrands’ cannabis practice can help grow your business or career? Reach out to Eric Rosen to start the conversation.