Moving Forward

[dropcap class=”kp-dropcap”]O[/dropcap]n July 13 the three agencies that regulate California’s cannabis industry, the Bureau of Cannabis Control (BCC), the California Department of Public Health (CDPH) and the California Department of Food and Agriculture (CDFA), all released their draft final regulations which will govern California’s regulated market. The California cannabis industry has been operating under emergency regulations, which were first issued in November 2017 and re-adopted in June 2018.

The proposed final regulations are not currently in effect, but they underwent a 45-day comment period, which ended on Aug. 27. Until the proposed final regulations are formally adopted, the current emergency regulations will still govern the industry. State law mandates that the regulations need to be finalized by the end of 2018. While there is no guaranteed date for when the proposed regulations will be formally adopted, many anticipate it will not occur before November.

Overall there are few dramatic changes in the proposed final regulations. Most of the changes help clarify definitions and detail application requirements and would otherwise be considered technical edits. However, there are several noteworthy changes that, if adopted, would have a big impact on industry. Below are a few highlights of the many proposed revisions.

BCC

• All agencies will no longer issue or extend temporary licenses after Dec. 31. Temporary licenses with an expiration date after Dec. 31 are valid until the expiration date.
• Retailers will be able to deliver to any jurisdiction within California, including cities and counties that have otherwise banned commercial cannabis activities.
• The BCC will provide applicants specific standard operating procedure forms to submit.
• Applicants must submit specific information if a project is determined to not be exempt from California Environmental Quality Act.
• Limited-access area rules will apply to all licensees, not just retailers.
• A licensee must either accept or reject shipments of cannabis goods in whole.
• The restriction that only a distributor can transport product after testing has been eliminated. Now after a batch passes testing, it may be transported to one or more licensed retailers, distributors or microbusinesses.

CDPH

• Child-resistant packaging may now be fulfilled using exit packaging at the point of retail, rather than needing to be placed on each individual product’s packaging.
• The definition of edibles has been further detailed and now includes items such as lozenges and mouth strips. Additionally, there is now a definition for orally-consumed concentrates for tinctures and tablets.
• Medical orally-dissolving edibles may now contain up to 500mg of THC per package, provided that these products contain no more than 10mg THC per serving and are marked “MEDICAL USE ONLY”.

CDFA

• Outdoor cultivators will not be allowed to use light deprivation techniques.
• The CDFA clarifies which activities are required to be entered into the new Track and Trace “CCTT” system.
• The CDFA defines what a pre-roll may contain.

Here in San Diego the biggest impact of the proposed final regulations is certainly the fact that storefront retailers can make deliveries into every city and county throughout the state. Since San Diego only allows for storefront retailers to engage in delivery sales, those retailers stand to gain a lot now that they can expand their customer base and make deliveries throughout the state regardless of whether that local jurisdiction has a ban. This is especially true as there are still many local jurisdictions in Southern California that have bans.

“It is crucial that the regulators find that balance between sensible regulations and prevent over-regulation that will suffocate the growth of a promising emerging market.”

In contrast, the proposed final regulations may place a significant hurdle on San Diego cannabis businesses that have yet to obtain a state license. The city of San Diego has an extensive application process, and none of the non-retail operators have been granted local authorization yet. As a result, if these businesses don’t apply for a temporary license before Dec. 31, they will be forced to initially apply for much more burdensome annual application and could have several more months to wait for state approval, meaning, they would still not be permitted to operate.

Enacting balanced and thoughtful legislation for a new market is understandably a challenging endeavor. It is crucial that the regulators find that balance between sensible regulations and prevent over-regulation that will suffocate the growth of a promising, emerging market. Unfortunately, for those who are routinely involved with cannabis compliance issues here in California, it may feel like they are experiencing a never-ending regulatory whiplash. Hopefully, the final regulations can finally provide the industry with a dependable set of rules that they can use to make strategic business decisions more than a few months at a time.