Batch-tracking: The next wave of marijuana tracking systems

Maine recently implemented a first-of-its-kind system to track legal marijuana sales, setting a new standard for the industry. Maine’s new batch tracking system makes it easier for vendors to comply and reduces error likelihood, making it significantly easier for people to participate in the legal marijuana market. It moves away from traditional seed-to-sale tracking systems to provide greater accessibility and efficiency to all marijuana cultivators and could be greatly beneficial when implemented in other states.

States with legalized recreational marijuana all launched markets with a requirement that commercial licensees track the location of every marijuana plant or package containing marijuana products using seed-to-sale tracking software. Licensees would be responsible for affixing a unique radio-frequency identification tag to every plant or package and entering any changes to that unit of inventory into an online software program to which state regulators would have access.

While this type of system theoretically helps regulators monitor commercial marijuana activity, the granularity of these requirements imposes steep labor costs on commercial licensees that impede the ability of legal suppliers to compete on price with illicit competitors. Reason Foundation proposed in 2019 that states begin tracking inventory on a batch basis rather than on an individual product basis, and now states are beginning to implement that approach.

Maine has just introduced Flexible Standardized Batch Tracking (FSBT). Marijuana plants that are genetically identical, grown in the same location, and treated simultaneously with uniform dosing of nutrients or other permissible chemicals should be able to be tracked as a group. This change eases the tagging and data-entry requirements for licensees, which is an otherwise inefficient and labor-intensive task.

In many states that have legalized cannabis, each plant must be weighed individually upon harvest and after drying, and those weights must be manually recorded into a software application. This granularity of data arguably provides regulators with no more meaningful information about the disposition of inventory than could be gleaned by weighing a group of 25 or 50 plants together. Maine’s new FSBT system allows homogenous plants to be tracked in groups of 5, 10, 25, or 50.

The inefficiencies created by granular tracking systems have often gone for naught when regulators fail to even make use of the resulting data. In theory, regulators can run forensic data tools on the inventory-tracking database to ensure recorded shipments of marijuana match receipts and look for other signs of potential diversion of inventory to the illicit market. However, regulators have failed to perform these analyses in some high-profile cases.

California regulators were sued in 2021 under allegations that licensed distributors were purchasing legal marijuana from cultivators and then selling it to illicit interstate traffickers. A key point among the lawsuit’s allegations was that regulators were collecting data about the amount of marijuana legally cultivated and wholesaled to distributors but failing to match those totals among the quantities that distributors subsequently sold to licensed dispensaries. A California Superior Court found the plaintiff did not have standing to challenge the manner in which regulators chose to enforce compliance, but the state’s Fourth Appellate District overturned that opinion, and the case is awaiting a new trial date.

California isn’t the only state that has failed to capitalize on highly granular data that is expensive for licensees to generate. Washington legalized recreational marijuana in 2012, but over a decade later, its tracking system still doesn’t work. The current system, the Cannabis Central Reporting System, is riddled with data errors. When licensees are required to complete voluminous data entry every day, they are prone to make errors, and these errors make the database worthless if the software doesn’t have adequate safety protocols to identify potential mistakes.

For example, Washington’s system indicates there were $7.7 billion in total marijuana sales in 2022—five times the amount ($1.3 billion) the state’s Department of Revenue reported. The errors were due to misplaced decimals in reported sales prices, missing records, and incorrect entry of transaction dates. These shortcomings open the door to illegal trade and undermine public trust in the legal market.

Given that so many states have struggled to correctly implement tracking software or failed to capitalize on the resulting database, there is a clear argument for simplifying these programs through batch tracking. In Maine, where craft growers dominate the market, nearly 80% of harvests are less than 50 plants, and about 57% of harvests contain 25 plants or fewer, so batch tracking addresses the needs of most Maine cultivators.

In addition to labor-cost savings from data entry, licensees will bear fewer direct costs of purchasing radio frequency identification (RFID)tags from the approved state vendor. RFID tags are unique for every inventory item to which they are affixed and cannot be reused, so the savings can be substantial. Using fewer tags also generates less plastic waste.

Without accurate data, regulators can’t stop illegal activity or ensure consumer safety, while businesses waste resources attempting to comply with a system that doesn’t work. One of the biggest benefits of FSBT is its adaptability. While growers can use batch tags for efficiency, they still have the option to tag individual plants when needed. This flexibility supports both large-scale producers and smaller artisanal growers, ensuring the system works for everyone.

Maine’s pioneering approach to batch tracking is commendable, and other states that have legalized marijuana should be looking to replicate its approach.

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