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The wait is finally over! Nearly one year-and-a-half after the Medical Cannabis Regulation & Safety Act (MCRSA) was passed, California has finally released its initial draft regulations. The industry has been waiting on pins and needles to gain a deeper understanding of the rules that will make California’s newly regulated commercial cannabis industry.

On April 28, 2017, three of the California state agencies tasked with implementing MCRSA released their first draft of rules that will regulate transportation, distribution and dispensaries (drafted by the Bureau of Medical Cannabis Regulation (BMCR); cultivation (drafted by CalCannabis Cultivation Licensing—a division of the CA Department of Food and Agriculture); and manufacturing (drafted by the Office of Manufactured Cannabis Safety—a division of the Department of Public Health). One week later, the BMCR released their initial draft of rules for laboratory testing.

“All interested parties are strongly encouraged to not only read the regulations but to also submit public comment.”

So now that the wait is over—let’s dig into some of the long-awaited rules.

Ownership

The regulations finally give the industry the definition of an “owner.” Not knowing the definition of an owner has made strategic planning for potential licensees extremely challenging. An “owner” is defined as follows: For publicly-traded companies, having five percent ownership or more makes you an owner; for privately held companies, an owner is: an individual who owns more than the 20 percent threshold, the CEO and all members of the board of directors of an entity, when the entity owns more than the 20 percent threshold, or an individual engaging in the direction, control or management of the licensee. This also includes “discretionary powers” to, among other things, direct and/or control the hiring and firing of personnel, contracting for the sale of goods on behalf of the applicant, and making policy decisions on behalf of the applicant.

Cultivation Regulations

With the release of CalCannabis regulations, the industry was surprised to see a new license type, “Processor,” which does not cultivate but simply cures, trims and processes the cannabis of other cultivators. The definition of canopy was also revealed, which refers to the designated areas at a licensed premises that will contain flowering plants at any point in time, calculated in square feet and measured using clearly identifiable boundaries of all area that will contain flowering plants at any point in time, including all of the spaces within the boundaries.

Notable Manufacturing Regulations

The Office of Manufactured Cannabis Safety also surprised the industry with two new license types. A Packager or “Type P” is for entities that only package or repackage medical cannabis products or label or relabel the cannabis product container. Licenses that do packaging or labeling of their own product as part of the manufacturing process do not need to hold a separate Type P license. An Infuser or “Type N,” is for manufacturers that produce edible products or topical products using infusion processes, or other types of medical cannabis products other than extracts or concentrates, and that do not conduct extractions.

One of the most concerning parts of the manufacturing regulations is the long list of prohibited manufactured products. Under the current draft, each of the following products are prohibited from being infused with cannabis: Alcoholic beverages, anything containing nicotine or caffeine, any food that must be refrigerated below 41 degrees Fahrenheit, any canned or juice product, perishable bakery goods that need refrigeration, dairy products, meat products, seafood products and the addition of cannabinoids to commercially available candy or snack food items.

Other Notable Dispensary Regulations

A licensed dispensary may only sell medical cannabis goods during the hours of 6 a.m. to 9 p.m. A dispensary shall not sell more than eight ounces of medical cannabis to a patient, or to a primary caregiver for each patient, unless their recommendation says they need more. Delivery of cannabis is also addressed. A delivery employee of a licensed dispensary must perform delivery of medical cannabis and, a licensed dispensary shall not use the services of an independent contractor or courier service to deliver medical cannabis goods. Unfortunately, the regulations do not make any provisions for non-storefront delivery licenses.

And sadly, long gone will be the days of free samples. A licensed dispensary shall not provide free samples of medical cannabis goods to any person, nor can licensed dispensary allow representatives of other companies or organizations to provide free samples of medical cannabis goods to individuals on the licensed dispensary premises.

These are just a few of the highlights from the incredibly in-depth regulations. All interested parties are strongly encouraged to not only read the regulations but to also submit public comment. The state plans to take feedback in writing and through a series of public hearings over the next several weeks.

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