Image via Paragon

More and more these days, we're hearing about how blockchain is being integrated into the cannabis industry, from IBM pitching the Canadian government on blockchain tech to manage its impending legal cannabis market, to dispensaries experimenting with cryptocurrency, to start-ups touting the benefits of blockchain management over seed-to-sale tracking in canna-legal states.

MERRY JANE interviewed the founder of one of such start-up — Jessica VerSteeg, CEO of cannabis blockchain company Paragon. Prior to officially founding Paragon last year, VerSteeg worked as a fashion and print model for nearly a decade, becoming Miss Iowa USA in 2014 and placing in the top 10 at the Miss USA pageant, before founding AuBox, a medical marijuana delivery service. VerSteeg was inspired to get into the cannabis industry following the loss of a close person in her life who accidentally overdosed on painkillers. She then decided to help by changing the public perception around alternatives to pharmaceutical painkillers, such as cannabis.

In our conversation with VerSteeg, MERRY JANE looks into how Paragon’s blockchain works, as well as a lawsuit facing the company, in which Paragon is accused of having not registered its “initial coin offering” with financial regulators.

Jessica VerSteeg, founder and CEO of Paragon

This interview has been edited for length and clarity.

MERRY JANE: Can you tell us about your background and involvement in Paragon?

Jessica VerSteeg: I started Paragon because I had another cannabis company Au Box, a medical marijuana subscription service in San Francisco. It required all suppliers to give me all lab results, which came on a piece of paper. How much can you trust that piece of paper? It started to really weigh on me. I'd get phone calls from mothers and fathers of children with epilepsy, asking if it's really CBD; “Is it really 90 percent CBD?” I said, "Yeah, that's what the lab results say on this paper." So I started re-testing products. Most of them were honest; some were not. You don't want to be giving something that's supposed to be medicine when it's not the right amount or right product.

I started logging the data from the suppliers, and then would backtrace it to what labs they tested it at. I would call the labs, ask if it's the real results, and get in touch with the farms where the cannabis came from. I started putting that in my own blockchain. It was just for me to verify the data, and once I started realizing how well it worked for me with transparency, I tried to find out if there was something that existed like this already. I couldn't find it, so I decided to build it for the entire cannabis space. I rebuilt it on a different blockchain and called it Paragon.

So what are the main uses for Paragon now?

Paragon is a really big ecosystem. We have around 7,200 users [from the cannabis industry] on our online platform, and tens of thousands registered to our email updates. Currently we are working hard to finalize our blockchain solutions and intend to start pilots on the technology very soon. Pilots will be initiated with growers in the industry as a first phase. The main part is going to be a farmer, a lab, and a supplier. Once all three of those [positions] work together on our blockchain, they can verify each step so that labs can say [for instance], "Yes, we tested this farmer's crop and here's the result," and verify what farmer wrote in the blockchain. If a farmer said, "I grew this with organic soil and didn't use any pesticides," now you can prove this with blockchain. Where the supplier comes in, the lab results and growing data go on the product.

The same way that UPS would track anything, on blockchain you can track and verify when the signature was made, and when the product was delivered. The government, as well, will have access to this and patients. When patients are able to scan a QR code and just have everything that they want to know, it can help a lot of people create trust [in their businesses] when they have transparent information.

Who are the main people using it?

Let's say a dispensary gets a Kiva chocolate bar. If Kiva is using our blockchain and has a QR code, the dispensary now doesn't have to retest this product or trust that piece of paper. You can just scan the QR code and see the lab data, growing data, [and] know if this is a product you can sell or not sell. On a bigger level, it's the government. A lot of people get scared thinking, "Oh, I don't want them to know this much information," but that's what keeps the government from really making this legal all around. We know they just want to tax everyone; they've legalized alcohol and cigarettes. When government has access to this, it creates this cycle of trust and transparency, which in turn makes it legal and easy for everyone.

Fundanna is one of our latest partnerships, the largest crowdfunding platform for cannabis start-ups in existence. Fundanna and Paragon will work together to provide industry innovators with the tools and guidance to thrive. In addition, we will soon be announcing a partnership with a large industry player in the U.S., so stay tuned!

What are Paragon's efforts to comply with securities law with respect to the lawsuit?

It's obvious that a lot of lawsuits going with ICOs [“initial coin offerings,” where individuals can purchase a cryptocurrency associated with blockchain platform] and these types of lawyers are just jumping on all kinds of ICOs to see if they can make a quick buck. It's a sad situation, and an abuse situation. These lawyers are abusing it. Paragon is dedicated to staying compliant with all aspects of the laws. We're not a security. We've had lawyers advise us on what to do; what not to do. We did everything legally. As U.S. Securities and Exchange Commision chairman Jay Clayton stated, there are cryptocurrencies that do not appear to be securities, and whether an initial coin offering [violates] the security laws depends on the facts.

So what are the facts as they pertain to Paragon?

We're confident the Paragon coin or token is not a security. Paragon holds itself to a high standard of compliance with token holders. It's a sad thing that's happening; a lot of us have to face this battle.

Do you think Paragon's business model presents risks to investors?

We don't have investors at Pargaon. There are no investors; we're not a security. Also, I want to say that we and the plaintiffs of the case have agreed that the hearing won’t take place. They're withdrawing the TRO — their request to freeze the assets — and their request for preliminary injunction.

What makes you confident in your vision for applying blockchain to the cannabis industry?

It was something that was actually needed by me. When anyone creates anything — if it's something they created for themselves, were passionate about — they then realize other people may need this, and if they’re willing to take time, resources, and energy [to] create this for anyone, it's a good project.

And do you think this can help facilitate cannabis legalization on a broader scale?

Right now there are seed-to-sale systems. They're funky and hard to integrate. So that's why governments still don't feel comfortable. If they can't see the info 24/7, why are they going to trust this space if they can't track and trace everything properly?