Whenever government enacts new regulations there will always be some people and businesses that will be unhappy with the new changes. So, it came as no surprise when California embarked on its mission to create a state licensing regime for cannabis businesses (as well as personal use) that issues would arise. What made enacting cannabis regulations in California so difficult is that ever since Californians voted for the Compassionate Use Act in 1996 (a/k/a Prop 215), cannabis cultivators, manufacturers, and dispensaries were operating without regulations in what everyone conveniently called the legal “grey” area (a Michael Cohen area of practice).
That all changed when the state legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA) in 2015 and a majority of the good people of California voted in favor of the Adult Use of Marijuana Act in 2016 (AUMA). In June of 2017, California Governor Jerry Brown signed into law Senate Bill 94 (a/k/a the Medicinal and Adult-Use Cannabis Regulation and Safety Act a/k/a MAUCRSA). MAUCRSA merged medical and adult-use cannabis activities under one regulatory regime and empowered three state agencies to license and regulate the commercial cannabis industry: The California Department of Food and Agriculture (cultivators, processors, and nurseries); the Department of Public Health (manufacturers); and the Bureau of Cannabis Control (distributors, retailers, delivery-only retailers, microbusinesses, and testing labs). Each state agency released their emergency regulations in November of 2017, which we covered for cultivators, manufacturers, distributors, and retailers.
The emergency regulations were quite the departure from the previously unregulated “grey” market of the previous twenty years. They were however not without some hiccups: Such as the removal of the cultivation acreage cap or the steadfast intransigence of local jurisdictions in licensing commercial cannabis activities.
After the release of the emergency regulations, representatives from the three state cannabis licensing agencies travelled up and down the state to solicit public input on the regulations. The reason the state continued to solicit feedback from the public was due to the fact that the emergency regulations were actually just temporary regulations. All three state agencies were required to release permanent regulations later this year – when exactly the permanent regulations were going to be released was anyone’s guess. While current cannabis businesses and aspiring entrepreneurs have been busy figuring out how to navigate the licensing landscape, the state just went ahead and made changes to the emergency regulations. Just this Friday all three state agencies released new emergency regulations (nothing like a regulation drop on a Friday!). We’ll cover the changes in greater detail in future posts (stay tuned) but here are a couple of highlights:
- Applicants can submit one application (and pay one fee) to obtain both an adult-use and medical cannabis license. Previously you had to submit two applications and pay two separate licensing fees if you wanted to operate in the medicinal and adult-use market. This applies to all three licensing agencies.
- A licensee can now engage in commercial cannabis activities with any licensee, regardless of medical or adult-use designation. This is a permanent extension of the transition period in the emergency regulations that allowed medical cannabis licensees to contract with adult-use licensees and vice versa (the transition period was set to expire on July 1, 2018). This also applies to all three agencies.
- The Bureau of Cannabis Control’s definition of financial interest holder was amended to specifically state that anyone that has an agreement to receive a portion of the profits of a commercial cannabis business will be considered a financial interest holder (there’s an exception for diversified mutual funds, blind trusts, and similar financial instruments).
- The BCC regulations also specify that licensees authorized for retail sales may not sell or deliver cannabis goods through a drive-through window.
- A retailer’s delivery employee can now carry cannabis goods valued up to $10,000 while making deliveries (the cap was previously set at $3,000).
- The Bureau of Cannabis Control reduced the annual license fees for its licensees.
- The Department of Food and Agriculture revised how it will measure canopy for indoor, mixed-light, and outdoor license types.
- The Department of Public Health (DPH) formally incorporated the regulations for shared-use facilities, which we covered here.
- The DPH specifically removed tinctures from the definition of a product containing alcohol. However, tinctures shall not be sold in a package larger than two fluid ounces and shall include a calibrated dropper or other measuring device.
The public will now have all of five days to comment on the re-adoption of the emergency regulations. The five day window for public comment will begin once the California Office of Administrative posts the emergency regulations on its website – which it can do no earlier than May 25, 2018. When these updated emergency regulations are formally adopted the licensing agencies will have 180 days to develop their final regulations. Be sure to check in as we update you with even more details on these emergency regulations and how they may impact your cannabis business.