The NCIA is the largest trade association representing legal cannabis businesses in the USA
Aaron Smith is co-founder and executive director of the National Cannabis Industry Association, the largest trade association representing legal cannabis businesses in the U.S. Prior to launching NCIA, Aaron distinguished himself as a public advocate for marijuana policy reform, first under the auspices of a California-based medical cannabis advocacy group, Safe Access Now in 2005, and then as the California state policy director for the Washington, D.C. based Marijuana Policy Project until founding NCIA in 2010. Aaron has successfully built coalitions with elected officials on both sides of the aisle in order to advance marijuana law reform legislation.
Marijuana Retail Report: Can you tell us a little bit about your background and what made you want to start the NCIA with your partner?
Aaron Smith: We started NCIA in 2010 because, at that time, there was a need for cannabis businesses that were emerging and coalescing into a real industry to be represented in Washington D.C. At the time, the industry was brand new. There were dispensaries in California, Colorado, and a few in Washington. Now, of course, we’re seeing a nationwide cannabis industry that’s thriving. It’s the fastest-growing industry in the country and we’re proud to represent that industry’s interests in D.C. every single day.
Marijuana Retail Report: The House Rules Committee recently blocked the full House vote on cannabis-related appropriations amendments. Do you see this administration as getting more and more aggressive against medical and recreational cannabis, and if so, do you see the states protecting those businesses?
Aaron Smith: The House Rules vote was certainly an unfortunate development. This action by Congressional House leadership is way out of step with the majority of Americans, who now support medical cannabis by a margin of almost 90% — almost no other political issue enjoys that kind of support. The fight to protect medical cannabis patients and providers isn’t over and we’re hopeful that the provision may still be included in the federal budget. It’s included in the Senate version of the bill and we’re working with our allies in the Senate to help ensure that it’s included in the full budget after conference committee.
Marijuana Retail Report: What do you see as being the best opportunity for new entrepreneurs who want to get into the industry?
Aaron Smith: The ancillary side of the industry seems to be bursting with opportunity. It’s really booming, the packaging, software, various professional services, consulting. The services that don’t require state licenses have the most opportunity for the broad market. Think of any kind of professional service or products that would be geared toward another industry and there’s probably a use for it in cannabis as well.
Marijuana Retail Report: Do you see social use lounges as being a real possibility for the industry?
Aaron Smith: I think it’s definitely a great possibility and a good opportunity for entrepreneurs. There is a booming cannabis tourism industry right now and none of the states allow marijuana consumption in public. I think that cannabis really should be treated similarly to alcohol, where it can be consumed in a private business that ID’s to ensure that the customers are over 21, just as a bar does, and ensures that people don’t drive home intoxicated or any of those sorts of things. I’d love to see cannabis consumption clubs spread across the country in states where such an opportunity would be legal. Denver’s been a place where that’s been a fight for a long time, with the passing of the Initiative 300 last year, that does allow social use, but there’s still a lot of range for the implementation there with the social use clubs.
Marijuana Retail Report: Which state would you see as being the next frontier for cannabis?
Aaron Smith: Obviously we have the eight states that have passed legal cannabis, in which half of those still haven’t fully implemented yet, with California being the big prize. Next, we’re looking to Michigan. Michigan has a ballot initiative that’s circulating and I think that they have a good shot at getting on the ballot for adult use and a good shot at passing, frankly, looking at the polling. For medical use, states like Utah and Missouri are looking poised to implement medical marijuana laws and it continues to go on the ballot. We’re getting to the point to where we’re going to run out of states with laws that allow the ballot initiative process, and then it’s turning to legislature, state legislatures to enact new marijuana laws. A lot of folks are looking at Vermont, which came close to passing a marijuana legalization initiative. That was vetoed by the governor, but we’re hoping in the next session, that could become a reality in Vermont. As this really begins to normalize, we’re coming up on five years of legal marijuana in Colorado now and Washington as well, and as people are seeing that not only did the sky not fall like the prohibitions predicted, there’s huge benefits, not just for the economy, but to the society as a whole, in treating cannabis in a legal and regulated manner.
Marijuana Retail Report: What are some laws that you see coming into play that could affect the industry and what opportunities do you see stemming from it?
Aaron Smith: The laws are different in every state, which is frustrating to a lot of the larger companies that are scaling from state to state. I think the key is compliance. I think that there’s a lot of opportunity in the field of compliance, consulting, and software, ensuring that businesses are complying with the nuances of their state law. California has hundreds and hundreds of pages of regulations that these businesses need to comply with that no others would need to. As far as new opportunities and new states, I think that, like I said in the last question, Vermont and Michigan are going to be, and from a market-size potential, Michigan is obviously much, much bigger than Vermont. It’s going to be a great opportunity.
Marijuana Retail Report: As international support for medical and recreational cannabis grows, do you see international expansion of the NCIA in the future?
Aaron Smith: We’re discussing that internally. We have allies in other countries that we’re always talking to. But for now anyway, we’re focusing on what we’ve become really good at, which is representing the cannabis industry in Washington D.C. to change US law. I think that that will have enormous national impact in and of itself.
Marijuana Retail Report: What are some of the initiatives that you guys are working on right now or lobbying towards?
Aaron Smith: Right now, the big focus in is the appropriations process that we talked about earlier, and ensuring that in the next fiscal year budget, those protections for medical patients and providers, at the very minimum, ensuring that we don’t slide backwards. Another big initiative for us is reforming 280E of the tax code. Your readers are retailers. They are painfully aware of what 280E is, which is a provision that does not allow cannabis retail businesses from deducting their ordinary business expenses. As the administration and Congress continue to talk about tax reform and possible tax cuts for small businesses, we’re working to ensure that 280E is part of that conversation.
Marijuana Retail Report: Speaking of 280E and also the IRS, do you see blockchain technology or cashless debt payment apps as being in the future for the cannabis field in order to reach compliance?
Aaron Smith: I think it’s one possible feature. While I’m happy that there are alternatives for cashless payment and that those are rolling out in places like Hawaii, I would caution against putting all of our eggs in one basket and relying on one particular app or one particular financial institution or payment method for an entire industry. I think that there will always be some cash exchange. In Hawaii, I would urge the state to allow cash to continue to be exchanged as an option, just as it is with any other goods and services. There’s no need to lock in only one payment method. What happens if the federal government goes after that institution or something else happens to that institution and patients are left with no other option, other than the criminal market, to obtain their medicine?
Marijuana Retail Report: Do you see banks becoming more open to accepting medical cannabis and recreational cannabis businesses in the future?
Aaron Smith: Yeah, certainly more banks are open to the industry every day and are coming up with programs to ensure compliance of their clients so that they can bank them. That’s happening now, but in the future, we’re working to change federal law so that financial institutions can treat cannabis businesses just like they would any other state-licensed business, and to end the banking crisis once and for all. It’s time to call on Congress to do that, because this is not only a huge inconvenience for businesses, it’s a public safety crisis for employees, patients, and consumers who rely on these businesses, that are oftentimes forced to operate on an all-cash basis.
Marijuana Retail Report: What are some things that you hope to occur at the conference for attendees at the NCIA conference in Anaheim?
Aaron Smith: What I expect is that attendees are really going to get a depth of information on California law, regulations, and operational best practices, as well as connecting with other industry leaders so that they can learn from each other’s successes and mistakes, and to really continue to raise the bar for the industry in California and elsewhere.
Marijuana Retail Report: At the NCIA Summit in Oakland, Vicente Fox had spoken about interstate and international commerce between Canada, Mexico, and the United States. Obviously, that would require federal approval, but do you see that as a possibility for the future?
Aaron Smith: Absolutely. Just like any other product, I see this as being something that can be imported and exported into the future, once the federal law changes here in the US, and I’m hopeful that the United States will continue to be the leading producer of quality cannabis for the world.
Marijuana Retail Report: If you could give a tip to our readers what would you advise them on?
Aaron Smith: Maybe this seems like a shameless plug, but it’s absolutely true, that if you’re in the cannabis space, you really can’t sit on the sidelines and expect policies to change in your favor without getting involved. The best way to get involved, of course, is to become a member of NCIA so that while you’re running your business and you have your head down in your operations, you know with confidence that you have professional lobbyists and public affairs staff working on your behalf in Washington D.C. every day.
Marijuana Retail Report: What’s next for you and what’s next for the NCIA?
Aaron Smith: We’re continuing to focus on the fight in Washington D.C. to get the laws changed. Ultimately, what we’re looking for is a federal system that allows states to continue their programs without interference and ultimately interstate commerce of marijuana. That’s probably five or so years down the road, but along the way, we are working on incremental changes like solving the banking crisis and ending the unfair 280E taxation. Thanks to our members, we’re continuing to build support in Congress and always adding resources into our federal advocacy operation.
Marijuana Retail Report: Aaron Smith, Executive Director and co-founder of the NCIA. I really appreciate your time today.
Aaron Smith: My pleasure.