Software, Technology, and Cannabis: Are Your Agreements Compliant?

For our clients in the cannabis space, from licensed operators to ancillary service providers, we’ve found that virtually no area of business (and no contract) is immune from the unique regulatory concerns of the industry. Our firm represents many ancillary companies that do business with cannabis operators, including software companies, delivery platforms, and other online service providers, and we regularly review contracts for these types of arrangements. In this post, we intend to spotlight some of the issues that cannabis businesses and service providers should be aware of when papering these deals, and to flag some of the issues that are often overlooked related to technology platforms and software licensing agreements

As with virtually every deal a cannabis business enters, whether or not that agreement is compliant or not will depend largely on two primary factors: payment structure and control. Every jurisdiction has wildly different regulations concerning ownership, financing, and profit sharing with cannabis licensees. In many jurisdictions, taking a royalty based on sales (i.e. a delivery platform taking a percentage of the sale price from order placed via its platform), or even taking a set “per transaction” fee, could constitute an arrangement that must be disclosed and/or vetted

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