WHAT IS AN “API” AND WHY DOES THAT MATTER TO THE CANNABIS INDUSTRY?

An application-programming interface (“API”) is a set of programming instructions and standards for accessing a Web-based software application or Web tool. A software company releases its API to the public so that other software developers can design products that are powered by its service.

As the Cannabis Industry emerges from state legalization efforts, with respect to both medical and recreational cannabis use, several states have taken the very important step of requiring a governmental seed-to- sale tracking system to monitor and ensure the public safety and licensees' compliance with regulatory requirements.

The state will be able to monitor the pedigree of custody of cannabis from planting all the way through the eventual sale of the cannabis product, be it bud, oil, edible, etc.  It was also track the disposal of waste, provide for inventory integrity (meaning no illegal product is introduced and no legal product is diverted from the system).  Seed-to Sale Tracking systems at the governmental level is the mechanism that provides a certain level of confidence in the integrity of the entire system, including the calculation and payment of tax obligations.

But remember the Governmental System, is not the same as a commercial seed-to sale tracking system.  It is analogous to the IRS using a certain software program to collect, analyze and reconcile reported tax information.  But this is not how the information gets reported to the IRS or State initially.  In the tax scenario you can upload and report your individual tax information by using Quickbooks, Excel or any other number of tax software products.  Remember, what program you choose to use to calculate your taxes and submit your return is up to you.  The government cannot mandate what private software you utilize. 

However, the government in the IRS case can mandate that there is an API available from the governmental system, which will allow any commercial system utilizing the published API, to capture information from the commercial system and accurately report such to the requesting agency.  In effect, an API is an open hand in this situation that extends from the government system that allows the private user to shake that hand and easily provide the required information, without engaging in an exercise of filing out a new tax form from the governmental system, after preparing the original on your private software.

This is the same situation with the current governmental seed-to sale systems in the cannabis industry.  The States have requested winning governmental contractors to provide a public API, so even if a winning bidder provides a seed to sale solution, the private cannabis industry participants are free to choose any commercial seed-to-software solution which is available in that state.  Essentially, simply winning a state seed-to sale, does not and should not, mandate a company to use the government’s chosen solution provider.

Simple so far.  But what happens when a company fails to follow through and provide a public API?  You have a broken handshake. This has been the case with Colorado’s governmental seed-to-sale tracking solution.  The government has requested, and expected a public API, so that commercial market participants in the seed to sale tracking software space would have healthy competition and the ability to accurately upload information to the state, without duplication of effort.  Unfortunately, should you ask any cannabis industry participant in Colorado, a lack of API has created major concerns since the efficiency of automation is negated by the Colorado’s seed-to-sale government provider’s lack of promised follow through.  Among many other issues, this particular one is felt everyday by cannabis industry participants in Colorado.

Long story short, because the RFID-based plant tracking governmental system in Colorado has not had an API since the beginning, every single licensee must enter their seed-to-sale inventory and point-of-sale data twice: once in their commercial record-keeping system and a second separate time in the METRC system.  The point of the API is to enable the record-keeping systems to push and pull data with the State's system, ensuring a one-to-one data relationship and reducing both the burden and the errors that come with double data entry.

Now the seed-to-sale cannabis tracking government solution in Washington State had very early on in the process provided a public API so that other industry participants could reap the benefits of what the system was supposed to provide in terms of efficiency and eliminating duplication of  effort.  Thereby providing a more economic solution than what currently exists in Colorado. A completed handshake.

So although I view the details behind the seed-to sale tracking systems as “magic electrons”, the result is that the provider of the seed to sale software on the governmental level can have a negative effect on cannabis industry participants, if its commercial software does not provide for an API for commercial seed-to-sale tracking companies.  So “API” might be the three most expensive letters that cannabis industry participants don’t really think about.

So in the future, States or other entities, may wish to require a proven and tested seed-to-sale tracking software public API before entering into a contract with any potential bidder.  It may save both the state and those who are being regulated from frustration, embarrassment and system failure.  Something to think about!

Please feel free to reach out to me at Gainsburg@bellsouth.net if you are have legal issues involving the cannabis industry.  I am here to serve the cannabis community.