Traceability Nightmare

MJ Freeway misses deadline, forcing Washington State Liquor and Cannabis Board to adopt contingency plan

The following article was originally printed in the December 2017 issue of Marijuana Venture, on sale now.

For the past several months, cannabis professionals in Washington have been using the phrase “Y502K” to describe the state’s switch from one traceability system to another, a play on words combining the state initiative legalizing recreational marijuana use with the nickname for concerns about the potential technology crash when the calendar rolled over to the year 2000.

But while the original Y2K concerns turned out to be overblown, Washington’s marijuana industry had its fears confirmed in late October when the state Liquor and Cannabis Board, the agency responsible for regulating the industry, announced MJ Freeway would not be ready to make the switch on Nov. 1, forcing many in the business to reach for pens and paper in order to stay in compliance with the state’s seed-to-sale tracking law.

In a joint announcement, MJ Freeway and the state Liquor and Cannabis Board announced they would not have the new system in place until Jan. 1, 2018.

As of Marijuana Venture’s press deadline, the impact of the delay was not immediately clear. State spokespeople claimed it would not affect most state-licensed businesses; however, industry participants are particularly concerned about the timing of the transition, as it comes at the exact same time as outdoor growers are harvesting their fall crop. Some have also accused the state and MJ Freeway of being less than transparent about the state of the system.

“It’s really disappointing it’s happening this way,” said Filucy Bay Farms owner Rob Greenlee, a representative of the Cannabis Farmers Council on the state’s Traceability Work Group. “It’s putting a huge burden on a lot of small farmers.”

In July, the state Liquor and Cannabis Board announced that MJ Freeway’s New Leaf Data Systems would take over the state contract after the original contract holder, BioTrack THC, declined to submit a bid on a request for proposals. BioTrack’s contract expired at midnight on Oct. 31.

On Oct. 23, the state announced it was activating its contingency plan because MJ Freeway’s system was not yet ready to go. During a meeting Oct. 24 with the Traceability Work Group, the state announced the contingency plan, which involves manually recording all transaction information in spreadsheets provided on the Liquor and Cannabis Board website. According to Liquor and Cannabis Board spokesman Brian Smith, the contingency plan will remain in effect until Jan. 1, but should only impact businesses that use the free, state system — about 25% of license holders. Businesses using third-party software should continue to collect and track the necessary data for later reporting.

“For the most part, they won’t see a lot of change,” Smith said of the 75% that use commercial software.

However, the state warned that licensees should check with their software providers to make sure their data is captured and stored.

Smith admitted the “compressed timeline” may have been too optimistic. MJ Freeway spokeswoman Jeanette Ward agreed, calling it a “very aggressive” schedule. Ward said it generally takes about seven to nine months to develop and install a new system.

“We had three and a half months,” she said. She called the Nov. 1 deadline “a shot in the dark” that the company tried its best to meet.

As of the Nov. 1 deadline, the system required additional testing and the MJ Freeway team decided it would be best to roll out a fully functioning and fully tested database from the start, rather than rushing to get the system online.

“It’s a hard decision to make,” Ward said. “It’s not ideal, but it’s the best course of action.”

Communication Breakdown

Much of the consternation over the announcement was due to what appeared to be a lack of communication about the state of the system. The first indication from the state that the deadline would not be met came less than two weeks prior to the switch. Up until Oct. 23, the Liquor and Cannabis Board website still said operators would only experience a two-day shutdown of the system, from Oct. 29-31, with New Leaf Data coming online as expected Nov. 1.

However, on Oct. 23, a new message appeared on the site announcing the contingency plan’s implementation and offering the following:

Four Key Things to Know Regarding Contingency:

1.) The information that we are requesting via the contingency plan is information that you are currently required to collect and retain;

2.) There is no halt to business during the contingency period. You may conduct business as usual. That includes transfers, sales, harvest, etc.;

3.) As you do today, you must keep a record of all required activity associated with your business. If you have a third-party, commercial software provider consider contacting them to review your coverage. Some software systems may capture traceability transactions for later reporting which may minimize your manual reporting requirements; and

4.) The LCB will continue to enforce rules and regulations during this period.

Licensees will be able to conduct business as normal during this time frame. You must keep records of all traceability activities that occur during contingency operations and must update the new Leaf Data System with those activities when it goes live.

The website also provides links to printable reporting documents.

According to the state, BioTrack declined a “six-figure offer over a four-month contract” to continue to provide services to Washington. Smith said multiple attempts were made to connect with the company, but in the end, “it got to the point where we had to move on” and the contingency plan was activated.

According to BioTrack CEO Patrick Vo, he opted out of the state’s RFP to continue the system because he did not feel that “some of the requirements of the new system were things we could support.” The company did not agree to extend the contract because Vo and BioTrack’s board of directors did not trust that MJ Freeway would and could keep the data safe during the interim period.

“We have serious concerns about having our security commingled with MJ Freeway,” Vo said, citing fallout related to MJ Freeway’s system being hacked and taken offline briefly in early 2017.

“This is our livelihood here,” Vo said. “This is a concern for us.”

On Oct. 26, Vo published an open letter to Washington state’s cannabis industry explaining the situation from BioTrack’s perspective. A PDF of the letter, including emails sent between Vo and the Washington State Liquor and Cannabis Board, can be found at: ***LINK***

In the letter, Vo details his back-and-forth with the state regarding his concerns over MJ Freeway’s security and admits that while no data breach has been confirmed, the uncertainty makes him leery to cast his company’s lot in with MJ Freeway’s.

“What we do know is that there is enough smoke that we are not comfortable moving forward without a reasonable level of assurance that the fire has been addressed,” Vo wrote.

Rough weekend, rough year

The Washington delay is the latest in a series of setbacks for MJ Freeway in 2017. For example, over the same weekend the state of Washington was making its announcement, users of MJ Freeway’s GramTracker point-of-sale system suffered through another round of outages in October that reportedly caused several dispensaries in multiple states to manually record all transactions in order to remain in compliance with state tracking laws.

According to Ward, the company noticed “inconsistencies in inventory and sales” at client sites and took the system offline for a period of time on Oct. 21 and again on Oct. 23 to resolve the issues. On both days, service was restored within a few hours.

Ward said the problems stemmed from a cache issue. Because of the interconnected way the software was built, however, glitches in one section of the code affect others, causing problems throughout.

All issues were solved, but because the data had to be restored to an earlier version of the database, some user data may have to be re-entered into the system. Approximately 1,000 dispensaries nationwide use the software.

According to Ward, there was no impact to MJ Platform, the company’s primary seed-to-sale tracking technology, which she said has never had an outage.

In addition, Ward said the company is planning to sunset the eight-year-old GramTracker software in 2018 in favor of an updated version that is currently available. The new version allows work on parts of the code without having to pull the entire system offline.

The most recent outage follows an early 2017 attack on the company’s system, the release of its source code to the web in June, the cancellation of the company’s contract with the state of Nevada in September and the announcement from the Washington State Liquor and Cannabis Board in late October.


Shifting the burden

But while the infighting and discussion will continue over exactly what happened and why, the bigger question is what it could all mean for the state’s producers, processors and retailers, many of whom have concerns as to whether their third-party software will store enough data for a long enough time to last the two-month contingency period. Smaller farms, particularly those in the middle of the outdoor harvest season, could have difficulty meeting reporting requirements.

“It’s a little hard to understand,” Greenlee said of the delay, adding that the communication from the state has not been particularly good. There was an email sent to licensees and then the Oct. 24 meeting, but aside from that, there was little outreach. As of Marijuana Venture’s deadline, no press release had been issued regarding the delay.

Greenlee said many farmers do not necessarily check their email every day, particularly if they’re short-staffed during harvest season. The delay is more likely to impact smaller operations that elected to use the free state program, rather than investing in a commercial traceability service.

Rick Hartman of the Tier 1 cultivator Army of Dankness in Yelm says he’s happy to stop using the BioTrack system, but he is concerned that something can be missed in the manual reporting that could snap the farm’s three-year violation-free run. He also says the increased labor is also an issue for a farm the size of Army of Dankness.

“It’s going to be a supreme pain in the ass to put it bluntly,” Hartman said.

Greenlee agreed, adding that the Liquor and Cannabis Board is not being accountable for its role in the delay and instead has shifted the responsibility and burden to the farmers.

“The big concern is (that) we want to make sure we’re fully compliant,” he said. “Not having a traceability system makes that more challenging.

“And that’s not what licensees need right now.”


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