United States: Marijuana And Privacy: A Primer

Last Updated: March 31 2017
Article by Rachel Hutchinson

Legal marijuana is America's fastest-growing industry. According to ArcView Market Research, cannabis revenue is expected to exceed $22 billion by 2020—nearly double that of the NFL. This past year, Colorado saw its sales reach over $1 billion. Here in Massachusetts, sales are expected to grow to $900 million within three years. Given the nationwide trend toward legalization (at the time of writing, seven states and the District of Columbia have legalized recreational use, while twenty-nine states have legalized marijuana in some form), cannabis is becoming an attractive investment.

But the industry faces significant challenges. Marijuana is still illegal at a federal level, and state regulations are constantly shifting. As Jennifer Carney of the Signal writes, imagine trying to build a viable business model when the rules change from month to month, you can't write off your business expenses, and your customers can't use credit cards.

One particular challenge facing the industry is data privacy. Legalization has led to increased oversight and monitoring, as well as to the collection and storage of personally identifiable information. But there is pushback from consumers. Data-collection practices are viewed with suspicion, even ones as routine as email-based rewards programs. The threat of a federal crackdown leaves most customers resistant to creating any sort of paper trail.

Anonymity cannot continue forever. Investors, especially big-ticket investors that bring the kind of legitimacy the industry craves, want data. Brand preferences, strain preferences, buying and consumption habits—all are waiting to be mined, tracked, and exploited. As more consumer information is collected, data security will play an increasingly important role. To protect their customers, cannabis retailers will need strong privacy policies, up-to-date security measures, and data-breach response plans.

Below are just some of the ways data privacy and the cannabis industry intersect.

Cybersecurity Breaches Abound

Customers have good reason to worry about data security—multiple medical marijuana databases across the country have already faced cybersecurity breaches.

For example, in June 2016, The Washington State Liquor and Cannabis Board suffered a breach when the agency accidentally disclosed license applicants' personal information in response to a public records request. The leak included tax records, social security numbers, driver's licenses, and financial information. The information was posted online before the agency could correct its mistake.

In late 2016, the Nevada Division of Public and Behavior Health suffered a similar blow when its medical marijuana database was hacked. Over 11,000 cannabis retail owners and employees had their information published online, a data dump that included names, social security numbers, races, addresses, and citizenship information. The Division had to shut down its database for over a month. In the meantime, dispensaries were forced to handwrite patient information in order to stay compliant with Nevada regulations.

Centralized compliance systems are especially vulnerable. In January 2017, the national database MJ Freeway, a multi-service compliance program used by medical marijuana dispensaries across the country, was the target of a cyberattack. Although no client data was reported stolen, the database itself was disabled for days, forcing 1,000 marijuana retailers in 23 states to handle sales, patient records, inventory tracking, and regulatory compliance issues alone. Many retailers had to close temporarily as a result.

Here in Massachusetts, the medical marijuana industry has seen its own share of privacy issues. Back in 2015, the health department confirmed the approval of over 6,800 patients via email. The emails contained detailed personal information, including patients' names, email addresses, and state-assigned program ID numbers—everything needed for a hacker to gain access to the state's medical marijuana database and access sensitive personal information. The health department was heavily criticized for sending the confirmations via an unsecured channel.

Privacy Concerns Loom Larger with Marijuana

When it comes to privacy, marijuana is different, both as a product and as a medical treatment. While patient information of any kind must be safeguarded, there is special sensitivity surrounding marijuana use. Stigma about cannabis, as well as fears about federal oversite, make marijuana-related data especially vulnerable to breaches.

This sensitivity extends to the recreational marijuana industry. Few people look over their shoulder walking into a liquor store, but many customers think twice before walking into a dispensary. People are worried about data falling into the hands the federal government, but also the hands of their employers. As Foley has noted, legalization does not always spell the end of workplace drug tests.

Legislators are beginning to recognize the danger. For example, in Oregon, concerns about a potential crackdown from the Trump administration prompted legislators to propose a law that would require cannabis dispensaries to destroy customers' personal information within 48 hours.

Data Collecting Practices Are Growing

But such laws are at odds with the needs of investors and retailers, who want more information about customers, not less. As Jennifer Carney points out, we are at the dawn of quantified cannabis. While the industry has resisted using technology in the past, largely due to legal concerns, the "green rush" toward legalized marijuana has created an opportunity for Silicon Valley to step in. Data science is poised to bring marijuana products out of the dark ages and into the 21st century.

Tech companies are already taking advantage. For example, Weave, a software company based in Boulder Colorado, uses data science to provide product analytics for dispensaries and point-of-sale menus for consumers. Flowhub, a Denver-based start up, offers a mobile device for scanning RFID plant tags and a cloud-based point-of sale system for dispensaries. The system automatically reports sales to state's compliance databases, and allows dispensaries to scan their customers' ID's for age and state of residency to confirm what they can buy based on state-specific regulations.

For better or worse, the trend in the industry seems to be towards cloud-based operations. In 2016, Microsoft announce that it was partnering with Los Angeles-based start-up Kind Financial to create software that will help states, counties, and municipalities track marijuana compliance. Microsoft has offered up its Azure cloud platform for the project. And as every industry expert knows, as goes the cloud, so goes the data breaches.

For Marijuana Companies, Robust Cyber Security Is a Must

Technology and cannabis will continue to intersect as the industry grows. E-commerce, advertising, and increasingly sophisticated data collection and analytics are all on the horizon.

Right now, the needs of consumers and companies seem to be at odds—consumers want less data collection, while tech companies and investors want more. If companies are to maintain consumer trust, strong cyber security measures are a must. After decades of criminalization, many customers remain skittish about the product they are consuming. Even in legal retail stores, shoppers will often give a fake name at the check-in counter after showing their real ID, so that their first names are not spoken aloud by staff. Others resist providing cellphone numbers or emails, even when doing so garners them significant discounts by way of coupons and insider-only deals. Cyber security will be essential to bridge the gap between consumers and companies.

The marijuana industry has a long future ahead of it, and data privacy and cybersecurity are bound to play a starring role. Watch this space for updates.

To view Foley Hoag's Security, Privacy and The Law Blog please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
25 Oct 2017, Webinar, Boston, United States

Foley Hoag will present a 60-minute webinar on Wednesday, October 25 at 12:30 pm EDT, offering guidance for in-house counsel regarding the basics of trademark and design protection in the European Union. Attendees will learn about the opportunities and pitfalls to be on the lookout for when looking to secure, protect, and enforce an IP portfolio overseas.

1 Nov 2017, Webinar, Boston, United States

Please join Foley Hoag on Wednesday, November 1, 2017 for a webinar that covers the details of drafting an appropriate arbitration clause for your company’s commercial contracts.

9 Nov 2017, Conference, Waltham, United States

Please join us on Thursday, November 9 at the Westin Waltham Hotel for our quarterly New England M&A Forum, which brings the latest in market trends and recent legal developments to the New England M&A professionals' community.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.