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meaning the previous emergency regulations (under which the industry has been operating for the past year) are no longer in effect.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 US Senate, by an overwhelming 86-11 vote, last week approved the sweeping Farm Bill containing language which fully legalizes industrial hemp. As we know, hemp, which is derived from cannabis plants, is used to make products from rope to clothing and does not contain THC, the psychoactive part of the plant. In colonial days hemp was so crucial that farmers, like George Washington, were legally required to grow it.
Most believe the House will follow suit. Hemp has not been legal on a federal level since federal criminalization of cannabis in the 1930s. Many believe that occurred in part because of fears of hemp competing with powerful timber interests and DuPont’s then new patent on nylon. After the 1930s bill was declared unconstitutional in 1968, the Nixon Administration helped orchestrate passing the Controlled Substances Act. That law, still in force, declared all parts of the cannabis plant as Schedule I drugs, as dangerous as heroin and LSD. A top Nixon aide later admitted, “Did we know we were lying about the drugs? Of course we did.” Constitutional challenges thus far have been unsuccessful.
Legalization of hemp could yield a variety of products that previously could only be produced with imported hemp. These could include food, building materials, paper products and many others. Currently, it it believed that China is the largest producer of hemp, since it is legal to do so in a number of Chinese provinces. They started farming it during the Vietnam War to make more breathable uniforms for their soldiers in the intense heat. This Senate vote is indeed a significant step towards relaxation of federal cannabis regulation.
Just weeks after Senators Elizabeth Warren (D-Mass) and Cory Gardner (R-Colo) introduced bi-partisan legislation to make marijuana lawful under a state’s marijuana laws also lawful under the Controlled Substances Act (CSA), Senate Minority Leader Chuck Schumer (D-NY) introduced legislation removing marijuana from the CSA altogether on Wednesday, June 27. Schumer’s bill also comes just one day after Oklahoman’s passed legislation legalizing medical marijuana in their traditionally red state, and one day before the U.S. Senate passed legislation legalizing hemp for all purposes, including extracts from hemp, such as cannabidiol.
By removing from the purview of the CSA, state-legal cannabis and proceeds derived therefrom, the Warren/Gardner legislation, if passed, would likely have the effect of nationwide legalization, but state operators and consumers would still need to be concerned about marijuana’s Schedule 1 status under the CSA, whereas the Schumer bill, if passed, would eliminate those concerns by removing marijuana from the CSA.
The Bureau of Cannabis Control is the state agency designated under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) as responsible for issuing licenses to and regulating distributors, retailers, delivery-only retailers, microbusinesses, and testing labs.
The BCC issued emergency regulations 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 BCC has proposed some changes to these regulations.
This blog post will highlight the changes to the BCC emergency regulations and identify key issues for distributors, retailers, delivery-only retailers, microbusinesses, and testing labs. In separate posts, we will be describing the changes made by the California Department of Food and Agriculture and the California Department of Public Health. Those posts can be found here and here.
Changes to Emergency Regulations:
The BCC has removed the distinction of A and M Licenses and now only requires one application and applicants will only have to pay one licensing fee. Additionally, license fees have been reduced. Previously you had to submit two applications and pay two separate licensing fees if you wanted to operate in the medicinal and adult-use market.
A delivery employee may now complete multiple deliveries of cannabis goods if they are prepared by the retailer prior to the delivery employee leaving the licensed premises. The total amount of cannabis goods in the delivery vehicle may be up to $10,000, the previous limit was set at $3,000.
The definition of owner has been amended to specify that the chief executive officer and/or the members of the board of directors of any entity that own 20% or more of a commercial cannabis business will be considered “owners.”
The definition of financial interests has been amended to include “an agreement to receive a portion of the profits of a commercial cannabis business.” Commercial cannabis business and service providers will have to review their agreements and applications to determine if certain amendments will need to be made to include other people or businesses as having a “financial interest” in a commercial cannabis business. Interestingly, this change was not made in the definition of “financial interest” under the CDFA and CDPH regulations.
Retail stores may not sell or deliver cannabis goods through a drive-through or pass-out window and sales cannot be made to people within motor vehicles.
License applications must now include:
Cannabis waste procedures; and
Delivery procedures, if applicable.
These changes show that the BCC and the other regulatory agencies are being responsive to their stakeholders and while not all changes are positive, we believe this is a step in the right direction for cannabis businesses in California.If you have any questions about the regulations, please contact Jennifer Briggs Fisher in our San Francisco office or Justin Santarosa in our Los Angeles office.
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→
Senate Majority Leader Mitch McConnell (R-KY) announced a plan on Monday to introduce federal legislation to remove industrial hemp as a Schedule I drug under the Controlled Substances Act (CSA). Citing hemp as important to Kentucky’s farming history, he voiced his most positive support to date for this action. McConnell remains opposed to other legalization of cannabis.
Hemp is used to make clothing, paper and other products, is not ingested and contains virtually no THC, which is the psychoactive part of the cannabis plant. In colonial days, hemp was grown throughout the US, and in fact was required to be grown in states like Virginia where it was needed to make rope for boats. George Washington and Thomas Jefferson both grew hemp on their farms. China is now reported to be the largest producer of hemp, having geared up in the 1970s to make more breathable uniforms for their soldiers in steamy Vietnam.
In the 1930s, timber and nylon scions like DuPont and William Randolph Hearst saw hemp as a potential competitor and reportedly worked with the federal government to make all cannabis byproducts illegal in the US. Nixon doubled down in 1970 with the CSA simply continuing the prior prohibition on everything coming from the plant.
While it’s not clear when a bill will actually be presented to Congress, the AP says McConnell said about hemp, “It’s now time to take the final step and make this a legal crop.” Many think the next move could be to legalize CBD (cannabidiol), which contains many of the medical benefits of cannabis with negligible amounts of THC.
Duane Morris is presenting a series of monthly webinars throughout 2018 to discuss issues affecting the cannabis industry. Each session will cover a specific subject and feature a “Hot Topics” segment to cover recent developments in the industry.
Join us for the second session on Tuesday, February 27, 2018, covering topics impacting the cannabis industry.
Cannabis 102: Intellectual Property, Trademark and Branding, and Marketing
Trademarks and Branding Cannabis Products
Patenting Cannabis and Cannabis Products
Trade Secrets: Advantages and Challenges
A Company’s Perspective with Guest Speaker: Gary Traynor, VP of Operations and Sales, LeafGoods, LLC