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California signs off on permanent cannabis regulations

Jan 21, 2019

Recreational Marijuana

By Pace La Via

Just over a year into recreational cannabis sales in the state, California’s Office of Administrative Law announced on Wednesday it had officially approved proposed rules submitted by the state’s three regulatory agencies. The new, “permanent” regulations take effect immediately but are subject to future revision.

“These approved regulations are the culmination of more than two years of hard work by California’s cannabis licensing authorities,” Bureau Chief Lori Ajax said in the official statement. “Public feedback was invaluable in helping us develop clear regulations for cannabis businesses and ensuring public safety.”

The rules were developed under California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act which created one regulatory system for both medicinal and recreational cannabis. The rules govern the growing, packaging, testing, sale, delivery, and marketing of cannabis within the state.

#ICYMI, California’s three state #cannabis licensing authorities today announced that the Office of Administrative Law (OAL) has officially approved state regulations for cannabis #businesses across the supply chain from cultivation to retail! Read more: https://t.co/RUuzxMAFPZ pic.twitter.com/lp5LjYtp3a

— BCC Info (@BCCinfo_dca) January 17, 2019

The 160 pages of permanent regulations replace those originally issued through the emergency rulemaking process to meet a legislative mandate to launch California’s regulated cannabis market on Jan. 1, 2018. The emergency ruleset was first adopted in December 2017, then was readopted in June of 2018, and it remained in effect until the permanent rules were approved on Wednesday.

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. Each agency’s final regulations are posted on the California Cannabis Portal.

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All three agencies submitted the final draft of proposed permanent cannabis regulations to the California Office of Administrative Law for review on December 3, and they were made public just a few days later on Dec. 7, 2018.

"Love it or hate it, California has regulations for commercial cannabis. There are no asterisks." — Hezekiah Allen, former executive director, California Growers Association

The move comes just days after the passage of a deadline for licensing of legacy co-ops. Under the emergency rules, cannabis collectives and cooperatives in the state were given one year to get properly licensed. As of January 10, medical marijuana collectives and cooperatives which are not properly licensed run the risk of paying hefty fines and potentially being charged with felonies.

The Bureau of Cannabis Control, the lead agency in regulating commercial cannabis licenses in California, is responsible for licensing retailers, distributors, testing laboratories, microbusinesses, and temporary cannabis events.

CVAULT from Potnetwork on Vimeo.

Statewide home delivery approved

One of the more controversial provisions in regulations drafted by the Bureau of Cannabis Control allows home deliveries of marijuana throughout the state, including to residents in municipalities where cannabis sales have been banned.

Both consumers and cannabis companies alike had pushed for home delivery as residents in vast stretches of the state are left with no convenient way to purchase cannabis products.

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Opposing groups such as the California Police Chiefs Association, the California League of Cities, and the United Food and Commercial Workers Western States Council argued that allowing deliveries to municipalities which have banned cannabis businesses weakens local government control.

"The public spoke loud and clear in favor of statewide delivery." - BCC spokesman, Alex Traverso

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.

Additional hurdles facing the industry

There are additional hurdles still facing the California cannabis industry such as lack of banking access and a thriving black market. By some estimates, black market sales have increased since recreational sales launched. According to a report in the New York Times, total cannabis sales in the state of California came in around $2.5 billion in 2018. That’s about half a billion below 2017 figures. Also, according to the report, tax revenue from pot sales is expected to come in under $500 million, $150 million or so short of projections.

Experts attribute the revenue shortfalls to high taxes making if difficult for legal operations to compete on price as well as it being more convenient for residents to continue to purchase their pot from their local dealer in most areas of the state. The convenience factor may be greatly reduced if home delivery catches on. However, some experts are predicting that home delivery and potentially other provisions in the new rules might be disputed in court.

Furthermore, questions remain on issues such as purity and potency testing for edibles. Under new rules levels of the psychotropic compound, THC must come within 10 percent of the amount advertised on a product label or be rejected. That’s far too narrow a window according to industry officials. Some products have reportedly already fallen victim to the strict standard, according to ABC news.

Other questionable provisions in the rules include a ban on partnering with unlicensed operators which opponents claim will unintentionally prevent such things as paid celebrity endorsements. There’s also been a reduction in the maximum allowed inventory onboard a delivery vehicle. And another provision prohibits licensing and branding agreements with legacy operators that have been growing or manufacturing without a state license. The latter measure will likely shutout a number of legacy operators that have had difficulties obtaining the necessary permits. Estimates as to how many of these operations are still unlicensed number in the hundreds.

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Further regulatory changes are likely in the near future as more cannabis bills are being batted around in the state capitol. Furthermore, California Governor Gavin Newsom has proposed changes as well.