One-Year Evolution

[dropcap class=”kp-dropcap”]I[/dropcap]n October, California’s Bureau of Cannabis Control (BCC), Department of Public Health and Department of Food and Agriculture each dropped proposed permanent regulations for the state’s cannabis industry, which, if no significant changes are made, will go into effect on Jan. 1, 2019.

Here are some of the key proposed changes across the board:

Intellectual Property Licenses

Basically, if you want to license your intellectual property (IP) to a cannabis operator in California, you’ll have to secure your own commercial cannabis license to do so. California would be the only state in the cannabis union to bar third-party IP-licensing deals for cannabis licensees, which will certainly undercut the business growth of a good amount of operators if this rule passes.

“Owners” and “Financial Interest Holders”

The BCC’s proposed rules essentially state that, once and for all, for “owners” or “financial interest holders” that are entities, the BCC is going to go through the entire entity structure until it reaches the humans behind these entities in order to vet them accordingly.

Premises

There are a number of modifications to the proposed rules concerning licensed premises, but here are the highlights:

• While it’s been routine for multiple licensees to operate on the same premises, the proposed modifications now expressly state that they do not “prohibit two or more licensed premises from occupying separate portions of the same parcel of land or sharing common use areas, such as a bathroom, breakroom, hallway or building entrance.”
• The premises must consist of permanent structures—shipping containers, modular buildings, or anything on wheels are not permitted—that are affixed to the ground and not capable of movement.
• There is now a form (BCC-LIC-027) to submit to the BCC to request to make a physical change or alteration to the premises.

“If licensees want to sell branded goods that are not listed in the definition, they will need to seek BCC approval first.”

Marketing and Promotions

Licensees will be prohibited from selling or transporting goods that are identified as any kind of alcoholic product (and they cannot refer to anything as containing or being an alcoholic product). There are also now definitions for promotional goods and branded goods. If licensees want to sell branded goods that are not listed in the definition, they will need to seek BCC approval first. The proposed modifications also clarify that licensees can provide customers with promotional non-cannabis goods—and it looks like these goods could be provided at the premises or via delivery, too.

Packaging

The proposed modifications set up a time tier for cannabis packaging, whereby until Jan. 1, 2020, cannabis packaging needs to be tamper-evident, in some cases re-sealable, and must not look like packaging that is marketed to children. Until Jan. 1, 2020, retailers and microbusinesses can satisfy this rule by providing opaque exit packaging that meets the foregoing standards.

Retailer Packaging

Similar to the revised distribution rules, the proposed modifications set up a timetable that require tamper-evident packaging until Jan. 1, 2020, and re-sealable, tamper evident and child-resistant packaging thereafter. There are opposite requirements for retailer exit packaging—it must be child-resistant, re-sealable and opaque until 2020, and then just opaque thereafter.

Deliveries

The rules now more heavily regulate a retailer’s use of tech platforms for delivery (i.e., the platform can’t share profits and can’t be the one doing the delivery, presumably unless it too is licensed). Delivery vehicles cannot contain any exterior markings that indicate that they are delivering cannabis goods. Delivery vehicles may now carry only $5,000 in cannabis goods at once. And the biggest change of all, per the modified section 5416(d), deliveries can be made into any jurisdiction in the state, so long as they comply with the BCC’s delivery rules. Currently, localities can and do prohibit deliveries from other jurisdictions. However, the BCC’s proposed regulations now open the floodgates to previously “dark” delivery jurisdictions.