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Up until now, before the term “commercial cannabis business” existed, all California cannabis businesses operated under the collective or statutory cooperative model. Now that California cannabis licensing has begun, 2018 called for the beginning of the end of the collective model and its protections of the collective defense, which will ultimately “sunset” or become moot by January 2019.

Limited Protections for the Cannabis Collective

Before Proposition 64 and the Medical and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), businesses operated in “compliance” with the Compassionate Use Act (CUA), Medical Marijuana Program Act (MMPA), also known as Senate Bill 420, and the Attorney General Guidelines of 2008 (AGG). Together, these worked to create a very murky grey area, offering a limited protection for cannabis businesses and directing them as to “substantially compliant” operations.

“Reportedly, as a condition of cooperation in non-enforcement against cannabis businesses, the state eliminated the collective defense that had protected the development of the medical cannabis supply since 2004.”

The California Legislature enacted the Medical Marijuana Program (MMP), codified as H&S Section 11362.7, et seq. to implement a plan to provide for the safe and affordable distribution of cannabis. In effect, the MMP expanded the law to include protections for patients who collectively or cooperatively cultivated cannabis, thereby creating the collective defense language protecting cannabis collectives and cooperatives.

Business Guidelines for Collectives Proved Problematic

Although the CUA became effective in 1996 and the MMP passed in 2003, in 2008, the AGG set forth for the first time, the guidelines for businesses to operate legally. Although a welcomed piece of guidance, it was hardly definitive, left much room for interpretation and resulted in extensive litigation across California. Particularly problematic with the collective defense or the statutory cooperative defense is the fact that the burden of proof lies with the defendant.

Unlike the American principle “innocent until proven guilty,” cannabis businesses had to almost prove their innocence by “raising a reasonable doubt” as to the criminality of their conduct. In American Jurisprudence, this is what we have come to know as an affirmative defense.

Although this was an exciting time for the evolution of the law, it left many business owners clueless, with criminal charges and/or convictions and horror stories chock-full of overzealous law enforcement encounters.

Under MCRSA, the Sun Began to Set on Collective Businesses

Inserted into the 2015 Medical Cannabis Regulation and Safety Act (MCRSA) and thereafter into MAUCRSA was a sunset provision calling for an “SB-420 collective defense sunset,” essentially abolishing the “collective defense.”

Many credit law enforcement with this piece of legislation. Reportedly, as a condition of cooperation in non-enforcement against cannabis businesses, the state eliminated the collective defense that had protected the development of the medical cannabis supply since 2004.

Thus, in order to be exempt from prosecution, all cannabis businesses must be licensed in the near future, except for individual patient and caregiver gardens serving no more than five patients and qualifying cooperatives.

Transition Period Ends with the Repeal of Health and Safety Code 11362.775

The coming year of 2018 is designed to affect the transition of California’s traditional cannabis market into a licensed and regulated commercial production and supply stream as smoothly as possible while the collectives phase out and commercial markets take hold.

During this transition period to licensed cannabis businesses, regulations set forth in the HSC Section 11362.775—the collective model—will remain in effect only until one year after the Bureau of Cannabis Control (BCC) posts a notice that the state licensing authorities have commenced issuing licenses. HSC 11362.775 continues on to say that the section that allows for the collective/cooperative model will be is repealed one year after the notice. This notice was posted Jan. 9, 2018. Thus, the availability of the collective defense will officially terminate on Jan. 9, 2019.

Although some businesses may qualify as an agricultural cooperative, most will have to become licensed, shut down, or face black market consequences.

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