Here come regulations for California’s cannabis industry
By Michele Brooke
The California Legislature is currently considering two important bills: Assembly Bill 266 and Assembly Bill 643. Depending on which bill passes (presuming one does), California likely will enact regulations by the end of this summer. These regulations will set up a new state licensing and regulatory framework for cultivation, manufacture, transportation, storage, distribution and sale of medical marijuana, and they will impact the way the cannabis industry operates in California going forward.
As a marijuana business lawyer, I meet regularly with entrepreneurs wanting to get a foothold in the anticipated cannabis industry. So, in order to guide these clients, I have reviewed AB 266 and AB 643 with some interest, because it seems they both lay out changes that are most likely to affect the cannabis industry in both the short and long run. The purpose of this article is to briefly highlight important terms of these bills that may be most immediately pertinent to medical marijuana patients who own collectives and to cannabis entrepreneurs.
Act Now!
According to either bill, the new licensing and regulatory framework likely will begin Jan. 1, 2016. However, prior to the New Year, both bills provide for provisional or conditional state licensing for people already engaged in the industry.
Article 6 of AB 266 would establish a three-month window of opportunity for qualified applicants to apply for provisional licenses, starting Oct. 1.
In addition, applicants will have to make their business records available to the licensing authority upon request. Applicants must be in compliance with local ordinances, and there will be background checks. The next licensing opportunity under AB 266 will not be until sometime in 2017. Beginning Jan. 1, 2018, engaging in commercial cannabis activities without a state license and local permit will be prohibited. This bill went up for a vote on July 8, 2015.
In contrast, AB 643 authorizes a facility or entity operating in conformance with local zoning ordinances and other state and local requirements on Jan. 1, 2016, to continue its operations until its application for conditional licensure is approved or denied. This gives potential applicants less than six months to have their business entities established, if they are not already, and to find a location to obtain a business license.
What Will Change
Either bill would result in monumental changes. Some items we will be looking at are state-issued requirements for sale, cultivation, transporting, manufacturing, testing and other commercial activities. AB 266 even envisions training or certification requirements for employees. In addition, AB 266 requires the applicant to be able to provide detailed operating procedures and financial records to the licensing agency. Supporters of the bills likely will want to see operating procedures put into place and will require labor and employment laws to be followed. In some establishments today, collective or dispensary owners are not following labor and employment laws.
Product-labeling requirements are part of both bills. When I say product-labeling requirements, I mean more than the little stickers you buy on the Internet identifying an item as permitted under Proposition 215. Products will require standardized labeling that comports with specific standards.
What Will Not Change
For now, the Compassionate Use Act of 1996 will remain in place for patients or their designated caregivers who have a valid physician’s recommendation. This could change if California votes for recreational marijuana in 2016. So, for now, physician recommendations still will be issued by physicians, but a more stringent requirement for a good-faith medical examination will be emphasized. Doctors who recommend that the patient may grow large quantities of marijuana, such as 99 plants, will come under greater scrutiny.
Additionally, local ordinances will continue to have preeminence over any state law. This means that if a city or county does not permit certain marijuana activity, this will not change (unless, of course, people take steps to challenge local ordinances through voter initiatives). Thus, collective or cooperative organizations that do not have a valid business license, conditional-use permit, or other license to operate in a particular city or county (including unincorporated areas), will continue to be illegal. Under either bill, it appears that if charges or suits are brought against illegal operators, they will be subject to stiff fines, as well as being disqualified from obtaining a license in the future. Finally, patients and primary caregivers may also continue to grow cannabis, pursuant to the California law for personal use, subject to local laws.
Prepare For The New Future
It is recommended that any patient interested in applying for a state license, whether provisionally or conditionally in the first wave of permit issuances, begin to get as organized as possible to stand the scrutiny of the licensing process. Under the passage of any bill, the standards are likely to be similar, and there also may be some residency requirements to consider for those hoping to enter this industry during the second wave of licensing. Thus, positioning and preparation must become an immediate priority for those who hope to engage in the California market.
Michele Brooke is an attorney in California who practices civil litigation and civil cannabis law (www.brookelawgroup). She is a member of Americans For Safe Access, NORML and the American Herbal Products Association.