By: Justin A. Santarosa and Jennifer Briggs Fisher
Gavin Newsom, Governor of California, released his proposal for the State’s budget today, outlining a number of items of importance for the California cannabis industry.
The most noteworthy proposal is regulatory consolidation. In an effort to improve and simplify regulatory oversight of commercial cannabis activity, the Governor’s office is proposing to consolidate the three licensing entities that are currently within the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health, into a single “Department of Cannabis Control” by July 2021.
Such a change would be welcomed by many operators in the State, especially vertically integrated operators who must now contend with multiple state agencies that have different regulatory requirements and interpretations. This may also boost M&A activity in the state, given that it could lead to more consistent regulations regarding ownership changes and a more efficient regulatory approval process. A single regulatory agency would also streamline fee collections and enforcement. More details on this proposal are expected in the Spring of 2020 and we will be watching closely for those updates.
Additionally, the budget looks to “fix” what many consider to be a broken cannabis taxation regime. The Governor states that the goal of the proposal is to reduce the tax collection burden on the cannabis industry and simplify the tax collection process. The proposed changes move the responsibility for the cultivation excise tax from the final distributor to the first, and for the retail excise tax from the distributor to the retailer.
While no changes to the tax rates are specified, the proposed budget does state that the Governor will consider other changes to the existing cannabis tax structure, including the number of taxes and tax rates. The California tax burden is viewed as one of the major inhibitors of the growth and success of the cannabis market in the state.
We will continue to monitor these developments as they unfold, so please check back for further updates and analysis.
On January 16, 2019 the California Office of Administrative Law (OAL) approved the final regulations that were submitted by California’s three licensing agencies, the Bureau of Cannabis Control (BCC), the Department of Food and Agriculture (CDFA) and the Department of Public Health (CDPH), in December. These new, approved regulations went into effect immediately, meaning the previous emergency regulations (under which the industry has been operating for the past year) are no longer in effect. The regulations can be viewed here.
In a joint press release issued by the three agencies, BCC Chief Lori Ajax stated: ““These approved regulations are the culmination of more than two years of hard work by California’s cannabis licensing authorities. Public feedback was invaluable in helping us develop clear regulations for cannabis businesses and ensuring public safety.”
The three agencies that regulate the cannabis market in California, the Bureau of Cannabis Control, Department of Food and Agriculture, and Department of Public Health, submitted a final version of regulations to the Office of Administrative Law (“OAL”) in California this month. The OAL reviews regulations for compliance with procedural requirements and substantive standards under California law. The OAL has 30 working days — until January 16, 2019 — to review the regulations.
The California Department of Food and Agriculture (CDFA), through its CalCannabis Cultivation Licensing division, is the state agency designated under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) as responsible for issuing licenses to commercial cannabis cultivators in California.
The CDFA issued emergency regulations for cannabis cultivators in November 2017, and has now proposed readopting those regulations for another 180 days. Based on feedback from the public and stakeholders in the industry, the CDFA has proposed some changes to these regulations.
California’s three cannabis licensing authorities, the Bureau of Cannabis Control, California Department of Public Health and California Department of Food and Agriculture, have proposed readopting their emergency regulations currently in effect for another 180 days. Since the original regulations were released in November 2017, representatives from the three agencies have been soliciting feedback from stakeholders and the public. As a result of that process, some changes are being made to the emergency regulations. Continue reading California Cannabis Licensing Authorities To Readopt Emergency Regulations with Proposed Changes→
On Thursday, March 8, 2018, Duane Morris hosted the Bay Area Women Grow Signature Networking Event in our San Francisco office. Our panel speakers included Duane Morris partner Jennifer Briggs Fisher, who specializes in providing regulatory and compliance advice to cannabis companies, and Nicole Elliott, the Director of the San Francisco Office of Cannabis. The panel was moderated by Women Grow Co-Founder Jazmin Hupp.
Our panel speakers addressed the cannabis business permitting process in San Francisco, the equity applicant program, requirements for licenses from the State of California, and legal and compliance considerations for cannabis businesses. It was a fantastic way to celebrate International Women’s Day!
On January 1, 2018, hundreds of California residents lined up outside just licensed cannabis retail dispensaries to purchase newly legal recreational marijuana. The founder of Buddy’s dispensary in San Jose, which holds one of California’s first recreational marijuana licenses, described it as the busiest day in the dispensary’s history. The California cannabis industry is projected to reach profits of $3.7 billion dollars in 2018 alone. Projections indicate there could be up to 4 million consumers of recreational marijuana in California. This huge opportunity has many new entrepreneurs, including celebrities like Mike Tyson, pursuing the cannabis business.
Under the new law, Californians over the age of 21 can now possess up to an ounce of marijuana, eight grams of marijuana concentrate, and grow up to six plants at home for their personal use. While public consumption is still banned, the new framework gives recreational users new flexibility. Those on the business side of recreational cannabis, however, still have a lot to consider before diving into this new market.
This is especially true given the news today that Attorney General Jeff Sessions is rescinding an Obama-era directive discouraging enforcement of federal marijuana laws in states where cannabis is legal. We will know more about how this decision will impact the California market after the announcement is officially made by AG Sessions later today. For now, we will provide an update on the first week of recreational cannabis sales in California.
On November 16, 2017, the California Bureau of Cannabis Control published emergency regulations governing both the medical and the adult-use cannabis industries in California. Below are the highlights of the emergency regulations and how they may impact distributors of cannabis products.
San Francisco Adopts New Rules for Recreational Cannabis
After months of debate and consideration, the San Francisco Board of Supervisors approved new regulations for recreational cannabis activity yesterday. The legislation will come back to the Board next week for a final vote and then will go to San Francisco Mayor Ed Lee to sign it into law. Highlights of the new regulations are outlined below.
Existing Medical Dispensaries Allowed to Sell Recreational Cannabis
Beginning on January 5, 2018, existing medical dispensaries and delivery services currently operating in San Francisco will be allowed to sell recreational cannabis. The existing cannabis dispensaries must obtain a temporary 120-day license in order to participate in recreational cannabis sales.