By Pace LaVia • January 15, 2019

California Cannabis Regulations: Navigating The Turbulent Waters

Cannabis businesses in California are subject to one of the most strict bodies of cannabis regulations in the world. And because regulations here have been in a state of perpetual flux for many years, navigating the state’s regulatory waters can be treacherous for both veterans and newcomers alike.

The current status of California cannabis regulations as of the time of writing is that they are in a purgatory between initially instituted “emergency regulations” and promised permanent regulations. A set of proposed regulations are outlined in this 160-page PDF document published by the California Bureau of Cannabis Control, however, they have yet to receive final approval.

For quite some time now detractors of the BCC’s approach to regulation have warned that over-regulation and high taxes would strangle many of the small businesses that attempt to play by the rules while making it difficult for them to compete with black market sources.

That prediction proved true when it was recently announced that the state actually sold about $500 million less marijuana in 2018 with a recreational market in place than was sold in 2017 when only medical cannabis was permitted. And the amount of taxes collected by the state are projected to come in at less than half what officials expected.

And matters seem to be getting worse, not better.

 

Deadline For Licensing Passed Jan. 9, 2019

On Jan. 9, 2019, the grandfather period for medical marijuana collectives and cooperatives ended. As a result, these dispensaries, some of which have been operating in the state for over two decades, will be forced to either get a valid license, close up shop, or operate in noncompliance. Many of these operations will choose the latter, risking being raided and shuttered by law enforcement and facing possible criminal charges and hefty fines. With roughly two-thirds of California’s cities and counties having banned retail cannabis businesses, many of these concerns — most of them small businesses — will find it impossible to obtain a license.

Some of these businesses have received temporary permits under emergency rules, but it will be difficult for many of these operators to secure full annual permits. Although officials predicted there would be as many as 6,000 cannabis licenses awarded in the first few years, at the time of writing less than 1/10th of those have been handed out.

In order to get a state license, cannabis producers must submit applications to as many as five state agencies. And it’s not only the state that these businesses have to deal with.  In addition to state rules, cannabis businesses must play by county and municipal rules which can be just as stifling if not worse.

Just 89 of California's 482 cities allow retail sales. And in Los Angeles, “the largest Marijuana market in the world,” just six of 88 municipalities have approved retail sales. Although state law permits home delivery, the Bureau of Cannabis Control has yet to finalize proposed rules which could allow dispensaries to deliver their goods to towns where retail sales are banned.

 

Proposed California Cannabis Regulations

Following input from the public regulators finalized a set of proposed permanent rules in early December. The proposed regulations developed under the Medicinal and Adult-Use Cannabis Regulation and Safety Act come from three agencies — the Bureau of Cannabis Control, Department of Food and Agriculture and Department of Public Health — and touch on all aspects of the cannabis industry from seed to sale including marketing.

Here are some of the more specific modifications proposed by regulators in the most recent draft of industry rules.

  • Cannabis delivery by third-party companies that do not have state MJ commercial licenses will be prohibited.

  • The amount of inventory a single delivery vehicle is allowed to carry will be reduced from $10,000 to $5,000.

  • Licensed applications will required applicants to disclose far more information about individuals and companies that hold ownership stakes.

  • Licensing and branding agreements with legacy operators that were growing or manufacturing without a state permit would be expressly prohibited.

These are just a few of the regulations outlined in this 160-page document. But, like we said, these rules have not been fully approved yet. So like it or not, if you’re in the cannabis industry in California, you’ll need to be carefully tuned into further developments in order to remain in compliance.

 

Compliance Simplified

What are the biggest problems that California cannabis businesses are experiencing when it comes to regulatory compliance? According to IndicaOnline, a publication focused on cannabis retailers, as of January 2018, the five most common violations committed by California dispensaries were:

  1. Operating without a license

  2. Failing to report inventory

  3. Exceeding patient purchase limits

  4. Sales to minors

  5. Lack of documentation for deliveries.

According to the article’s author, “If cannabis compliance violations are committed, the offending cannabis retailer will first be sent a notice to comply. If the violation is not addressed within 15 days of receiving the notice, the marijuana dispensary could be subject to citations and administrative fees up to $5,000.”

The best way to avoid these and other regulatory violations is to implement a robust seed-to-sale tracking application such as the one built into Viridian Science’s cannabis ERP system. Our seed-to-sale tracking system has up-to-date regulatory requirements built right in, as well as auditing and reporting tools which make it easy to comply with regulations.

Viridian Sciences ERP has been developed to integrate with any required compliance system to enable tracking and reporting. It is designed to handle multiple locations as well as multiple industry verticals including growers, processors, labs, distributors, and dispensaries, as well as to be flexible and scalable to grow with your business.

The California Cannabis industry is in a state of rapid change. Within this evolving environment, it is reassuring to know you are running a trusted seed-to-sale trace-ability system. One that will help keep you up-to-date with regulations and requirements for each country, state or city.

 

 

Further Reading