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Accounting, Tax, IRS & Marijuana

Surviving MJ Freeway's Fallout

While Americans are still grappling with Russia’s alleged hacking of the US election, the cannabis industry has been reeling from its own digital vulnerability.

On January 8, 2017, MJ Freeway announced on Twitter that hackers had brought down its main servers and backup system. According to MJ Freeway, this cyber-attack has impacted over 1,000 dispensaries spanning 23 states that use the software.

While most banks, credit card companies, and POS companies will not serve the federally illegal cannabis industry, companies like MJ Freeway, BioTrack THC and Flowhub have stepped up to provide a desperately needed service. Most states have implemented laws that require dispensaries to use "seed-to-sale" tracking software to track product from the plant, to the shelf, and finally to the customer. The system is meant to prevent marijuana from being diverted into the black market. This means if a dispensary's seed-to-sale software is down, the risks are high. A dispensary can lose its license to sell marijuana if a product goes missing or is unaccounted for by the end of each day.

Westword writes, “The issue isn’t the industry, though-it’s prohibition. Dispensaries are forced to partner with POS systems like MJ Freeway because of pot’s legal status. Banks are scared to serve cannabis companies out of fear of retribution from the feds, so a vast majority of shops are cash only. Companies like MJ Freeway were smart enough to start POS systems specific to dispensaries, but they may be less capable than their highly funded and secure counterparts at bars, restaurants and retail shops.”

The recent cyber attack left much of the cannabis industry struggling to operate properly. While some of the dispensaries closed, those that remained open were left to track sales via paper and pen, warning clients via social media of possible long lines and slow processing.

Amy Poinsett, CEO of the cannabis software company, has called the hack an “unprecedented malicious attack”.  Jeanetter Ward, MJ Freeway’s director of data and marketing went on to tell The Boston Globe, “It was a cyber-attack, and it was targeted at us specifically. We are going full-force with a forensic investigation, and we’ll turn over the results to criminal investigators as needed.” The company has stressed repeatedly that there was no danger of customer data being corrupted. In the meantime, while the investigation continues, MJ Freeway reportedly plans on providing dispensaries with access to older versions of the platform.