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California agencies release final draft of proposed cannabis regulations

Three California agencies responsible for overseeing the state’s cannabis industry have published the latest draft of proposed permanent cannabis regulations. The documents were submitted to the California Office of Administrative Law for review on December 3 and made public on December 7.

Voters in the state approved the creation of a recreational marijuana market when Proposition 64 passed two years ago. The proposed permanent regulations are being developed under the Medicinal and Adult-Use Cannabis Regulation and Safety Act which creates one regulatory system for both medicinal and recreational cannabis.

The three agencies involved in regulating the state’s cannabis industry include the Bureau of Cannabis Control, California Department of Public Health, and the California Department of Food and Agriculture. The package sets out the rules for how marijuana is grown, packaged, tested, advertised, and delivered.

Once approved, the proposed regulations will replace emergency regulations which were originally adopted in December 2017 and have been in effect since the state launched recreational sales on January 1, 2018. The emergency regulations were readopted in June of 2018 and remain in effect until the rulemaking process is complete.

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The current emergency regulations were originally issued to meet a legislative mandate to launch California’s regulated cannabis market on January 1, 2018.

Two previous drafts of the permanent rules released in July and October were followed by 45-day and 15-day public comment periods. The comments have been taken into consideration in the new rules as have testimonies from public hearings on the matter.

Statewide home delivery

One of the more controversial provisions in regulations drafted by the Bureau of Cannabis Control allows home deliveries of marijuana any anywhere in the state. This includes locales where cannabis businesses are banned.

Opposing the delivery provisions were law enforcement groups such as the California Police Chiefs Association as well as the California League of Cities, and the United Food and Commercial Workers Western States Council. The groups argued that allowing deliveries to municipalities which have banned cannabis businesses weakens local government control and might result in an increase in crime in those areas.

The BCC argues that Proposition 64 expressly allows for statewide deliveries and that medical marijuana patients in areas which have banned retail sales may be prevented from purchasing their medication. The provision was added after several law enforcement officials in cities which have banned retail sales pointed out that they could arrest delivery drivers.

Ban on partnering with unlicensed operators

The proposed rules also included a ban on partnerships between permit holders and unlicensed operators in order to prevent such partnerships from doing business in the black market. For example, licensed retailers would be prohibited from partnering with unlicensed delivery services. Opponents say the provision could undercut business models of companies such as Eaze and Weedmaps which currently facilitate deliveries. Opponents of the provision claim that a ban on partnerships will unintentionally prevent such things as paid celebrity endorsements.

Reduction of delivery inventory

Also in the draft rules is a provision which reduces the amount of inventory allowed to be carried by a single delivery vehicle, from $10,000 to $5,000. Furthermore, at least $2,000 of the inventory would be required to have existing delivery orders.

Packaging and labeling

Also being revised are provisions covering packaging and labeling of cannabis products. For example, child-resistant packaging will not be required until January 2020. Another allows manufacturers to delay labeling a products THC and CBD content until after they are lab tested.

Disclosure of stakeholders

Under the draft rules, licensed cannabis businesses would be required to disclose far more information about individuals and companies that hold ownership stakes.

Event venues expanded

A provision in the currently active emergency regulations which confines cannabis-related events to county fairgrounds has been removed. The move is expected to spur an increase in the number and type of cannabis events in the state.

Shutout of unlicensed legacy operators

A provision prohibits licensing and branding agreements with legacy operators that have been growing or manufacturing without a state permit. The measure will likely shutout a number of legacy operators that have had difficulties obtaining the necessary permits.

Easing of testing requirements

Product recalls, and the failure of approximately 20 percent of products to pass lab tests has prompted a provision that eases strict testing rules.

Unlimited cultivation permits

Regulations drafted by the California Department of Food and Agriculture would continue to allow farmers to receive an unlimited number of permits to grow pot.

What are the next steps?

Unless California’s Office of Administrative Law objects to the rules, they will become law 30 days after submission. However, some experts are predicting that certain provisions in the draft rules might be disputed in court.

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Until the new rules are activated, the industry will still be governed by emergency regulations that were readopted in June. The Bureau will not be providing guidance related to these regulations until OAL has completed its review.

Click here to view the proposed regulations.

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