Could This Company Push the Feds Toward Legalizing Cannabis?

David Dinenberg, CEO of cannabis technology service company KIND Financial, says the regulatory framework for legal pot will only grow — and that could be revolutionary.

(Courtesy photo)

“Just because something’s legalized doesn’t mean it’s a free for all,” says David Dinenberg, CEO of the Los Angeles-based KIND Financial. “The better the rules and regs are at the state level, the larger the industry is going to become.”

He’s referring to pot, whose legality is in a curious phase these days. Yet the idea of a regulatory compliance expert weighing in on cannabis sounds a little like a Dilbert cartoon come to life, or Bill Lumbergh from Office Space pointing to a banner reading “Is It Good for the Company?” while managing to ruin something that still carries a whiff of danger.

But Dinenberg’s field is a surprisingly dynamic one whose success has the power to shape the way government at all levels treats marijuana, with far-ranging consequences for weed’s availability, the way cities and states raise taxes, and the criminal-justice system.

And he fell into it after watching a segment on 60 Minutes.

A real-estate developer who experienced a lean period after the 2007 recession, Dinenberg relocated from Philadelphia to Southern California and switched careers at a time when only 16 states permitted legal cannabis in some form. The legal flux seemed like an opportunity to do good while earning a living, he says, comparing the variation in different states’ outlooks on cannabis with their different approaches to guns.

“It really started out as a research project, to be honest with you,” Dinenberg says. “I understand the differences between states, but what I didn’t understand was how something that was illegal at the federal level could be legal at the state level.”

Because he had a passion but “no interest in touching the actual product,” he chose to get involved at a point in the food chain where he could effect the most change.

“The foundation of every heavily regulated industry in the world — whether that’s alcohol, tobacco, firearms, gaming, pharmaceuticals — is ‘track and trace,’ ” he says. “And in this industry, we call that ‘seed to sale.’

KIND compliance software is called Agrisoft Seed to Sale. With it, an industry that’s prohibited from obtaining bank loans and forced to deal in all-cash transactions has learned to professionalize.

“Seed to Sale has become a mandatory license requirement in basically all the states at this point,” he says. “What I’ve come to realize is that it’s the most important thing in this industry other than the product.”

Dinenberg freely concedes that this is a self-serving opinion, but he has a point. As with the timeline of virtually all social causes that go from radical to mainstream, bomb-throwing activist play one vital role and insiders play another. Though they may not always work in sync, they carry the ball toward the ultimate goal: legalization at the federal level. And by demonstrating to government agencies that the marijuana industry acts like any other, cannabis growers, extractors, and delivery companies help move the needle.

In California, even though full legalization through Prop 64 won’t happen until Jan. 1, 2018, cannabis businesses already use KIND’s products for things like inventory control, tracking patient ages, registering medical recommendations, payroll, and marketing. (State regulators use it, too.)

“All the licensees are preparing themselves to be in that compliant position, so that when they can start applying for the new licenses, they can check all the boxes,” Dinenberg says.

A complicated regulatory framework akin to what governs alcohol might depress the hell out of off-the-grid libertarian growers, it’s true. (And look how expensive a liquor license can be in San Francisco, for that matter.) But Dinenberg says that even though some 60 percent of the electorate approves of decriminalization in some form, it would be foolish to rely on popular will alone to get us there. He points to Sandy Hook, the 2012 massacre in Connecticut that led to a spike in demands for sensible gun reform — and exactly zero pieces of legislation from Congress for Pres. Barack Obama to sign.

For Dinenberg, the best way for cannabis to transition out of its 90-year period of illegality — and to clear the records of the hundreds of thousands of Americans who are or have been incarcerated for low-level drug offenses — is for it to willingly invite the state to regulate it.

“It’s becoming very difficult if not impossible to stop it at this point,” he says.

Of course, things look bleak at the top. At best, the Trump administration seems caught in an internecine civil war between law-and-order types who want to quash any liberalization of drug policy (led by Attorney General Jeff Sessions) and bureaucratic nihilists who’d prefer to crush the regulatory state itself (free-floating adviser Steve Bannon). And Dinenberg is circumspect about what the landscape might look like in five or 10 years.

“That’s the ultimate question and it does deserve an answer,” he says. “I like to take a neutral approach and just say, ‘Let’s live and learn and see what happens.’ My personal opinion is the medicinal market is going to be left alone and be allowed to grow and prosper. If they’re going to play around with any laws, I think it could possibly be the recreational laws. But I’m still taking that wait-and-see approach.”

In a time of slashed budgets, the potential windfall might be too tempting for the prohibitionists to hold out forever.

“Look at California,” he says. “Over $1 billion in tax generation in this state? That’s a lot of schools, a lot of infrastructure, a lot of good.”

Citing Trump’s controversial tax break with air-conditioning manufacturer Carrier, Dinenberg senses a willingness to cut deals, especially when so many state governments remain pressed for cash.

“We all know that most states are not rich,” he says. “They’re broke and looking for new revenue generators and raising taxes — whether that’s through hotel tax, gasoline tax, whatever those excise taxes. It’s time to find new revenue, not raise existing tax structures, and I think the marijuana industry is the catalyst for that.”

If we do that at the state level, the federal legislators are already taking this very seriously,” he adds. “But we have to treat it the way we treat selling widgets.”

The social stigma to being a pot-smoker is quickly evaporating. Pretty soon, the state’s queasiness about treating cannabis and its billions of dollars might go up in smoke, too.

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