In Washington State’s legal cannabis market, software glitches due to a botched software update with the massive database Leaf Data Systems in July cost businesses hundreds of thousands of dollars in lost revenue. The issues prevented businesses from transporting their products and meant some businesses had to furlough workers.
The vendor, MJ Freeway, the maker of Leaf Data Systems and based in Denver, worked with state regulators and third-party software companies to address the issues, but for many, it’s the straw that broke the camel’s back. Washington State marijuana businesses are pushing the state to end its contract with the software vendor, and asking regulators to rethink the entire concept of traceability, which has been a point of contention for regulators and businesses in the state’s cannabis industry.
In a case of bad timing, MJ Freeway recently merged with another company, MTech, to form Akerna. The new company began trading on the Nasdaq market in June.
The software update in July was intended to allow cannabis testing results to link to products in the Leaf Data Systems database. This was primarily to prevent “gaming” the system, whereby producers and processors could simply claim their products passed testing and introduce them into the marketplace.
As states continue to legalize medical and recreational cannabis, the effort required to avoid black market product diversion might be more than initially anticipated. The traceability side of the equation poses another level of complexity, as the sheer quantity of product to track and test — from seeds to plants to end-products — requires constant data flow.
For example, California’s legal recreational market began over a year ago, yet only a portion of the industry is participating in the state’s ‘track-and-trace’ system. Coincidentally, in 2017, Nevada stopped using MJ Freeway as a contractor after the company was hacked. Washington’s issues with MJ Freeway have existed since its roll-out in early 2018.
Industry players are asking Washington State’s Liquor and Cannabis Board to allow businesses to track their own plants and products, reporting the information upon audit requests. The current system requires businesses to submit information to a central database and await approval before distribution can occur.
