Operating a Cannabis Processing Business in Kentucky: Compliance Guide for New Processors
Turning raw cannabis into refined products – edibles, oils, tinctures, topicals – is the job of the cannabis processor. In Kentucky’s medical marijuana program, processors play a crucial role in creating safe, legal products for patients. If you’re among the entrepreneurs who secured one of the coveted processor licenses (or you’re planning to pursue a future license), you’ll need to navigate a complex web of regulations from production standards to distribution rules. This guide is aimed at “compliance-conscious” processors, meaning those who want to do things by the book from day one. Below, we break down Kentucky’s latest rules and share practical insights for launching a processing operation that not only succeeds in business, but also aces every regulatory requirement.
Kentucky Processor License Basics and Responsibilities
Kentucky initially set a limit of 10 processor licenses statewide , making processors a relatively exclusive club. The first application round (summer 2024) resulted in a lottery in which these licenses were awarded to businesses positioned to handle cannabis manufacturing. As a processor, your core allowed activities are:
Extracting cannabis material: You can take cannabis flower and perform extractions (using solvent methods like CO₂ or ethanol, or solventless techniques) to create concentrates, oils, or distillates.
Manufacturing products: You’re authorized to infuse or create cannabis products – think edibles (gummies, chocolates), tincture drops, vape cartridges, capsules, topical creams, etc. Essentially, processors are the product manufacturers in the cannabis supply chain .
Packaging and labeling for sale: Processors will typically package the finished products and label them appropriately to send on to dispensaries. This includes putting all required information on labels and ensuring child-resistant packaging, so that when the product arrives at a dispensary, it’s ready for the shelf.
R&D and testing (internal): You are allowed (and encouraged) to conduct research and development to improve your processes and formulations . While final compliance testing must be done by an independent lab, you can do in-house QA testing to refine your products.
What processors cannot do is equally important: You cannot sell any cannabis products directly to consumers . There’s no factory outlet or direct online sales in this medical system. Your customers are the dispensaries (and possibly other processors or cultivators in some supply-chain transactions). Also, you cannot cultivate cannabis without a separate cultivator license. You must source all raw plant material from licensed cultivators or, potentially, purchase intermediate oils from other processors if you’re making a combined product. Think of the processor as a B2B (business-to-business) operation: you take inputs from cultivators, add value, and then pass products to dispensaries.
The processor license came with some hefty requirements. Applicants needed to demonstrate at least $150,000 in available capital (to ensure you can afford equipment, facility buildout, etc.), and like all licensees, pass background checks and detailed scrutiny of your plans. Kentucky is looking to processors to maintain the highest safety standards, because these are the facilities handling chemicals, high-temperature equipment, and producing ingestible goods for patients. The regulations for processors (915 KAR 1:040) and related rules cover everything from the type of facility you need to how to handle recalls. Let’s delve into those compliance areas.
Key Compliance Requirements for Cannabis Processors in Kentucky
Running a compliant processing facility in Kentucky involves adhering to many layers of regulation. It might seem daunting, but a systematic approach will help. Below are the major compliance pillars you must build into your operations:
Facility Standards and Security: Your processing facility must be secure and meet certain standards similar to cultivation sites. This means an enclosed, locked facility that unauthorized individuals cannot access. All entry points should be monitored. Given the nature of processing, your site might resemble a lab or commercial kitchen depending on what you produce. Ensure you comply with any building and fire codes, especially if using flammable extraction solvents (you may need special ventilation or classified rooms). Keep in mind that like cultivators, processors also need to conspicuously display their license on premises and cannot share space with unlicensed entities . Only conduct cannabis processing at your approved location.
Employee Qualifications and Training: Every person working in your lab or kitchen must be 21 or older and have no disqualifying felonies – you likely vetted this during hiring. But beyond that, you must train your staff on safety and compliance. This includes handling of hazardous materials (if any), proper use of PPE (personal protective equipment), what to do in case of a spill or accident, and of course, the chain-of-custody procedures for cannabis. For example, when raw cannabis is delivered from a cultivator, have a protocol to weigh it, log it into your inventory system, and secure it. If your process generates cannabis waste (trim, solvent waste with THC, etc.), you need procedures to render that waste unusable and document its disposal according to regulations.
Inventory Tracking and Records: As a processor, you sit in the middle of the seed-to-sale chain, so meticulous inventory tracking is critical. You’ll receive cannabis plant material (which is tracked in the state system under cultivators’ inventory) and you’ll output finished products (which need new tracking entries for dispensaries). Kentucky’s regulations require using the state’s electronic tracking system for every step – from receiving to processing to transferring out. For instance, if you take in 100 lbs of raw flower and produce 5,000 vape cartridges, your records must show how that input translated into outputs (and account for any loss or waste in the process). Keep production batch records that tie input lot numbers to output product batches; this is vital in case of any product recalls or investigations. The state can ask for these records at any time.
Product Testing and Quality Assurance: Kentucky mandates that all medicinal cannabis products must be lab-tested and pass quality standards before sale . Unlike some states where the lab collects samples, in Kentucky processors often must submit samples to a licensed Safety Compliance Facility (lab) for each batch. You’ll need to coordinate sampling – typically, you’ll randomly select units from a production batch and send them to an independent lab for testing of potency (THC/CBD levels) and contaminants (pesticides, heavy metals, residual solvents, microbiologicals, etc., as outlined in 915 KAR 1:110). You cannot ship products to dispensaries until you receive a passing lab report. Plan your production schedule accordingly, as lab testing will add some lead time. On your side, implement strong QA checks: perhaps invest in in-house testing equipment for basic checks (like moisture content or preliminary potency) to ensure you’re likely to pass the official tests. If a batch fails testing, regulations will require you to destroy it or possibly remediate it (if feasible) under supervision, which is costly – better to build quality in from the start.
Packaging and Labeling Compliance: As noted earlier, processors are generally responsible for final packaging of products. Kentucky’s packaging rules (915 KAR 1:100) are very detailed. Every product unit must be in child-resistant packaging . If it’s an edible, the package likely needs to be opaque (to not entice kids) and reclosable if it’s a multi-dose package. Labels have to include: the product’s name, the producer/processor name and license number, a unique batch or lot ID, the date of manufacture, net weight/volume, cannabinoid content (e.g., 10mg THC per serving, 100mg total THC in package, plus CBD if applicable), a list of ingredients (for edibles/ingestibles), allergen warnings (if any, like “contains tree nuts” for a cannabis-infused almond chocolate), and the universal state warning statement for cannabis. Kentucky’s required warning might be something like “For use by qualified patients only. Keep out of reach of children.” There are also restrictions: no false health claims, no images likely to appeal to minors (cartoons, etc.), and nothing that mimics commercial products (you can’t brand your THC gummies “MedSkittles” looking like Skittles candy, for example). Setting up a compliance review for all your labels and packages before mass printing is smart – it’s much cheaper to tweak a label design upfront than to have to recall products from dispensaries because of a labeling error.
Transportation Rules: Processors will need to deliver products to dispensaries. Kentucky’s regulations include specific rules for transporting medicinal cannabis (915 KAR 1:080 covers transportation). You can only transport cannabis in a registered vehicle and using manifest documents. For instance, if you’re sending a shipment of products to five dispensaries, you must generate a manifest in the state system detailing the contents (product types, quantities, batch numbers), the origin and destination, departure and expected arrival times, and the personnel transporting. The driver (likely your employee or a contracted secure courier) should carry the manifest during transit. Shipments must be in locked containers within the vehicle, and there are likely rules like “go directly to the destination, no unnecessary stops.” As a processor, ensure your logistics team is trained on these transport protocols. Any incident (like a vehicle accident or law enforcement stop) involving cannabis transport must be reported and handled according to procedure.
Operational Safety and Hygiene: If you’re making consumable products, you essentially need to run a food-grade facility. Adopt cleanliness standards akin to commercial kitchens or pharmaceutical labs. This means stainless steel surfaces, sanitary drains, regular cleaning schedules, and possibly getting food handling permits for staff if required by local health departments. For extraction processes, emphasize safety: if using flammable solvents (ethanol, butane), you should have proper ventilation, explosion-proof equipment where needed, and fire suppression systems. Employees should never run extraction equipment solo – always have at least two people for safety. Keep detailed logs of maintenance for critical equipment (e.g., if you have a CO₂ extractor, document the maintenance and any repairs). Kentucky will inspect processing facilities, and a well-documented, clean, and safe operation will demonstrate your professionalism and compliance.
Recordkeeping and Reporting: Beyond inventory, maintain comprehensive records of all activities. This includes standard operating procedures (SOPs) manuals, batch production records (as mentioned), employee training logs, equipment maintenance logs, and records of any waste destruction. If you need to destroy any cannabis (due to testing failure or spills or returned product), Kentucky will require you to render it unusable (often mixing with soil or water, making it non-retrievable) and document that destruction with witnesses. Also, any incidents like a theft, loss, or serious injury at the facility likely must be reported to the state. Knowing the reporting timelines (usually within 24 hours for major incidents) is part of compliance.
Tips for Staying Ahead as a Compliance-Focused Processor
Kentucky’s cannabis rules are new – and new regulations often evolve. As a processor committed to compliance, you should build habits and strategies that keep you ahead of the curve:
Assign a Compliance Officer: If your operation is sizable, designate one of your team members as the point person for compliance. This could be you as an owner, or an operations manager with an eye for detail. This person will stay up to date on any changes in regulations, manage inspection readiness, and ensure all recordkeeping is in order. They should conduct periodic self-audits, walking through the facility and checking if security cameras are all operational, if inventory counts match the system, and if SOPs are being followed on the floor.
Engage with Industry Groups: Processors in Kentucky can benefit from sharing knowledge. While you might be competitors in some sense, it’s valuable to participate in any industry association or informal group of licensees. These forums allow you to learn about regulatory updates or how others are handling a compliance challenge. For example, if the state issues new guidance on allowable levels of residual solvent in vape carts, hearing how other processors adjust helps you adapt quickly. Kentucky regulators have shown openness to feedback; collectively, industry voices can help shape reasonable policies over time.
Plan for Renewals and Scaling: Kentucky’s initial processor licenses are valid for one year and then subject to renewal. The Cabinet will review issuing new licenses periodically starting in 2025 , which suggests the market could expand if patient demand grows. To renew your license, you’ll need to show you operated in compliance and likely that you met the commitments in your application (such as producing certain products, meeting safety standards, etc.). Keep a file through the year of all compliance activities – it will make the renewal application easier because you can demonstrate your track record. As patient demand increases, you might aim to scale up production; remember that any major modifications (like expanding your facility or adding a new processing technique) might need regulatory approval or at least notification. Always integrate compliance planning into your business growth strategy.
Stay Flexible and Ready for Audits: Unannounced inspections can happen. Regulatory inspectors may come to audit your facility, inventory, and records. If you maintain your operation in a state of readiness – meaning cleanliness, records up to date, staff knowledgeable – an audit should be uneventful. Consider doing mock inspections where you walk through everything an inspector might check. Is every camera feed being recorded and stored for the required days? Can you pull up a specific batch record quickly if asked? Are employee badges worn at all times on site (some regulations require ID badges for staff)? This level of attention can prevent minor issues from becoming violations. Regulators often appreciate when licensees are proactive and organized, and it can foster a positive relationship.
Partner with Cannabis Law Experts to Ensure Compliance
Even with the best intentions, the compliance burden on processors is substantial. Technical regulations and evolving rules can trip up even meticulous operators. That’s where seasoned legal counsel can make a difference. KY Cannabis Law Group is here to support Kentucky processors in every aspect of legal compliance and strategy.
Our team, led by Managing Attorney Bradley Clark, has expertise in Kentucky’s cannabis regulations from A to Z. We stay constantly updated on the latest rules – from 915 KAR 1:001 definitions to 1:110 testing standards – so you don’t have to parse these dense documents alone. Bradley has advised cannabis businesses on compliance in multiple states and has a deep understanding of how to implement regulatory requirements in real-world operations. We can assist in drafting your SOPs, reviewing your recordkeeping systems, and even conducting a compliance walkthrough of your facility before the state does.
One area we pride ourselves on is integrating technology for compliance. For example, we can help set up digital compliance checklists or utilize AI tools to quickly answer regulatory questions (Bradley has developed AI compliance chatbots to interpret cannabis regs ). This means when you’re unsure about a rule – say, the exact labeling font size required or the threshold for a “disqualifying felony” – we can get you an answer promptly, backed by the regulatory citation. Our goal is to be an on-call resource for your team, so you feel confident in your compliance posture at all times.
Moreover, KY Cannabis Law Group understands the business side of processing. We know you have investors to satisfy and production targets to meet. Our advice balances legal compliance with practical business sense. If there’s a more efficient way to meet a requirement, we’ll suggest it. If you hit a snag, like a batch that failed testing or a need to recall a product, we will guide you through the proper steps to resolve the issue with minimal disruption and in full cooperation with regulators. Having handled these scenarios before, we help demystify the process and avoid panic.
Call to Action: For Kentucky cannabis processors who want peace of mind in compliance, contact KY Cannabis Law Group at (859) 474-0001. Whether you need a one-time regulatory compliance audit, ongoing legal counsel, or emergency help with a specific issue, we’re ready to assist. We believe that with the right guidance, Kentucky’s processors can lead the nation in producing safe, effective cannabis medicines. Let us put our knowledge to work for your operation, so you can focus on innovation and quality – we’ll handle the legal complexities.
