California Marijuana Regulation Moves Forward

July 2017 - Legislation to improve the state’s cannabis regulations in time for the January 2018 deadline has moved forward expeditiously in Sacramento, with the legislature approving the Governor’s comprehensive budget trailer bill to unify the regulation of medical and adult-use cannabis. The bill, SB 94, entitled the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), took effect immediately upon the Governor’s signature after receiving well more than the required 2/3 vote.

MAUCRSA melds the state’s medical-only regulations passed by the legislature (a.k.a. MCRSA) with the adult-use rules approved by the voters under Prop. 64, a.k.a. AUMA (Adult Use of Marijuana Act). For the most part, it follows the more flexible, industry-friendly rules of AUMA, such as allowing applicants to get licenses in different phases of the industry—cultivation, manufacture, distribution and retailing—rather than restrict so-called vertical integration by allowing just a single kind of license, as under MCRSA.

In particular, MAUCRSA eliminates MCRSA’s controversial independent distributor requirement, which would have required all products to be wholesaled through independent distributors with no connection to the industry. Instead, MAUCRSA allows any licensee to obtain their own distribution license, allowing them to sell to retailers directly. Consumer advocates had opposed the independent distributor requirement, which was modeled on the state’s alcohol industry, on the grounds that it would give stranglehold control of the market to a select group of middlemen, who could mark up prices appreciably.

MAUCRSA authorizes the issuance of temporary special-event licenses for onsite sale and consumption at county fairgrounds, provided that access is restricted to adults 21 and over, and alcohol and tobacco sales are prohibited.

MAUCRSA also changes all references to “marijuana” in state law to “cannabis.” The Bureau of Medical Cannabis Control, which presently oversees licensing, is renamed the Bureau of Cannabis Control.

One feature of AUMA that was dropped from MAUCRSA was a California residency requirement for all license applicants. Critics objected such restrictions would be unconstitutional.

Under MAUCRSA, applicants have the choice of applying for a medical “Type M” or adult-use “Type A” license in any category (cultivating, manufacture, etc.). While they are allowed to file applications for both type A and M licenses, one sticking point in MAUCRSA is that it requires A and M licenses to operate on “separate and distinct” premises. Thus a dispensary couldn’t cater to both adult-use and medical clients at the same location, as they do in Colorado and legal states. Similarly, extract manufacturers, cultivators, etc. would have to maintain duplicate facilities for adult-use and medical products.

Clean-Up Bill AB 64 Will Allow Mixed Premises

In response to widespread objections, the Governor’s office has agreed to fix this problem. A provision to allow co-location of adult and medical use facilities has been incorporated in a separate regulatory clean-up bill, AB 64 by Asm. Ron Bonta (D-Alameda), co-sponsored by Asm. JimWood (D-Healdsburg), Reggie Jones-Sawyer (D-Compton), Ken Cooley (D-Rancho Cordova) and Tom Lackey (R-Palmdale).

AB 64 would:

(1) allow medical and adult-use licenses to operate on the same premises;
(2) amend California’s Model State Trademark Law to allow trademarks for cannabis products; and
(3) allow existing medical collectives, which must still operate as not-for-profits under SB 420 pending state regulation, to operate on a for-profit basis immediately.

AB 64 passed the Assembly 71-8 with bipartisan support and seems likely to be enacted this session, in which case it will take effect immediately.