Technology Risks Paralyze Marijuana-Related Businesses

Nearly every business relies on technology in some way to operate. Without it, many businesses will have to stop operations entirely. It’s a very real problem that we’ve seen often in the news, and now, technology risks are affecting the marijuana industry on a large scale.

Cyberattacks and the Paralysis of Marijuana-Related Businesses

This week, MJ Freeway, a company that provides tracking software used by approximately 1,000 medical marijuana dispensaries and recreational marijuana retail stores in 23 states was the victim of a cyberattack. As a result, marijuana dispensaries and retailers who rely on the software to process transactions, access customer histories and patient records, track inventory, manage their business and marketing, and stay compliant with regulatory requirements had two options:

1. Close their doors until the system was working again, or
2. Continue to operate but handle all transactions manually, which would include treating all patients as “new” since they couldn’t access patient records.

For businesses that need to process sales to stay in business, neither of these options is a good option. After the MJ Freeway cyberattack, many marijuana dispensaries and retailers had to shut their doors. Others opted to process transactions manually, which increased patient and customer wait times, and will add a significant burden in terms of paying employees to enter all manually collected information into the MJ Freeway software when it’s accessible again. Others report already being contacted by regulatory agencies asking for information they can’t provide since they can’t access any data through the system.

The Problem in the Marijuana Industry is Lack of Competition

In the Marijuana Licensing Reference Guide: 2017 Edition, Cannabiz Media identified a lack of competition as a significant factor that negatively affects the marijuana industry. In the book, Cannabiz Media evaluated the barriers to competition as it relates to marijuana cultivators, processors, dispensaries, retailers, and testing facilities, but as this week’s news demonstrates, the lack of open competition in the industry extends to pick and shovel businesses as well.

Marijuana dispensaries and retailers in some states are required to use MJ Freeway’s system. These states track marijuana from seed-to-sale via MJ Freeway, so opting out of using it is not an option. However, we’ve now seen what happens when there is no competition. When MJ Freeway’s system went down, marijuana-related businesses were paralyzed. Businesses lost time, money, and customer satisfaction. These losses will continue until the MJ Freeway system is completely back up and running (which is estimated to be weeks), and will continue well beyond then.

It’s important to point out that MJ Freeway did have redundancies and backups in place, but the type of cyberattack did enough damage that restoration won’t be quick and easy. In the meantime, marijuana dispensaries and retailers have to wait to do business as usual. There is no other system that they can switch to in order to keep running at maximum capacity.

Bottom-line, there will be financial losses to the affected marijuana businesses. The lesson to learn from this event is simple. Free and open competition is essential to a business environment, even in the marijuana industry.