Earlier this month, California’s regulatory bodies governing the cannabis industry (Bureau of Cannabis Control, CA Department of Food and Agriculture, CA Department of Public Health) released their proposed permanent regulations. To date, the state’s cannabis industry has been operating under “Emergency Regulations,” which established many overall benchmarks, but were planned as a stop-gap to give lawmakers and industry operators a chance to launch the legal market, and determine what changes were needed.
The proposed permanent regulations will undergo at least one 45-day stage of public comments. After which, revised regulations will be released and another stage of public commentary will begin. Only then will the final regulations be determined and enacted into law.
In the meantime, we’ve taken a look at some of the proposed changes and offer our thoughts on their efficacy and potential impact on the industry at large.
Significant Proposed Changes to Cannabis Regulations
Combining M (Medicinal) & A (Adult-Use) License Types
The Change: Though it had been announced previously, this is a much anticipated update. Previously, operators at every level of the supply change had to choose either M- or A-license designations, and were only allowed to do business with licensees of the same type. Confusion about licensees and their types was causing all manner of chaos as operators struggled to rebuild supply lines upon receiving temporary licenses.
The Impact: This is a rare example of a regulatory change where, literally, everyone is in support. Restrictive activity between license types made interactions between elements of the supply chain difficult, without providing an obvious benefit. Now, whether a cultivator, distributor, or dispensary primarily serves adult-use or medicinal customers, they can work together to meet market demand and grow their businesses.
Deliveries Can be Made Statewide
The Change: New language will allow licensed businesses to make cannabis deliveries anywhere in the state. Even in jurisdictions that have banned any combination of retail, processing or cultivation.
The Impact: California’s cannabis regulations have, so far, given a lot of power to local jurisdictions to determine the level of cannabis activity in their area. Allowing delivery of cannabis makes an important statement that the legality of cannabis use has been determined on the state level. As such, all residents of the state are allowed access to cannabis. This is a big boon to adult-use consumers and medicinal patients who are limited in their ability to access cannabis. Retailers and delivery services are, no doubt, celebrating the mandate to operate their businesses in a fair and open market.
Advertising Restrictions are Detailed
The Change: The proposed regulations provide more detail on rules restricting cannabis advertising. Specifically targeted are campaigns that might appeal to children, such as the use of toys and cartoon characters. Additionally, outdoor advertising must be affixed to a building or a “permanent structure,” which bars mobile billboards attached to trucks or truck trailers. The regulations also offers guidance for how advertisers can demonstrate they are following the rule that 71.6 percent of their audience is 21 years old or older.
The Impact: Rules limiting the ability to market to children are common sense and unlikely to meet significant resistance from industry operators. The other restrictions seem sensible but also create gray areas and uncertain interpretation. We at ELLO recommend cannabis companies adhere carefully to these guidelines when planning future advertising and marketing campaigns.
THC Potency Rules Updated
The Change: Previously, manufactured products had a THC potency limit of 100 milligram per package. Medicinal advocates argued that this restriction limited the ability for patients to receive therapeutic levels of THC. It seems the Department of Public Health acknowledged the issue and has changed the potency cap to 500 milligrams per package for some medicinal products.
The Impact: While the change represents progress, the language is decidedly limiting, allowing the 500 milligram change for medicinal “orally-dissolving” edibles only. Plus, the 10 milligram per serving cap still applies. Even so, this is one of the first examples of regulators “loosening” restrictions and may represent a growing willingness among regulators to listen and respond to the needs of consumers and patients.
Exit Packaging Rules Detailed
The Change: Among many retailers and industry advocates, the issue of packaging has been a hot topic. In the proposed rules, regulators have executed another whiplash-inducing change, requiring that all exit bags (the bags one leaves the dispensary with) are “resealable, child-resistant, and opaque.” This is a change from the previous requirement that all products must be in individual child-resistant packages.
The Impact: California’s cannabis industry is still reeling from the impact of the packaging and testing requirements that went into effect July 1. Many retailers and manufacturers have spent thousands attaining compliance with the emergency regulations. Now another curveball as the standard is shifting again. In addition, many industry advocates are questioning the environmental impact of requiring exit bags, as California recently banned single-use bags at retailers. While the safety benefits of “resealable, child-resistant, and opaque” are lauded by all, there are still some specifics to be worked out regarding the cost-impact and environmental responsibility.
How to Make Your Voice Heard
Cannabis industry operators, investors and advocates play an important role in developing California’s regulatory framework. To facilitate a collaborative process, California’s regulatory bodies have created two ways for you to assert your opinion on the proposed regulations.
The BCC will be hosting three public hearings where any person may submit a comment in person, or in writing:
- August 7, 2018, 10 a.m. to 12:00 pm
Hilton Oakland Airport, One Hegenberger Road, Oakland, CA 94621
- August 14, 2018, 10 a.m. to 12:00 pm
Millennium Biltmore Hotel, 506 South Grand Avenue, Los Angeles, CA 90071
- August 27, 2018, 10 a.m. to 12:00 pm
Tsakopoulos Library Galleria, 828 I Street, Sacramento, CA 95814
You may also submit written comments up until end-of-day August 27, 2018. Submit your comments to the BCC at:
Lori Ajax: Chief Bureau of Cannabis Control
2920 Kilgore Road Rancho Cordova, CA 95670
Compliance is at the Core of Effective Cannabis Business Operation
Regulatory compliance is an absolute necessity for the continued operation of a cannabis business in California, or anywhere else in the US. With complex regulations regularly in flux, it is essential that you and your employees understand the ins-and-outs of compliance at every level of the organization.
The benefits of attaining and maintaining regulatory compliance include: efficient operation, effective controls and system feedback, and the confidence that “surprise” visits from regulators are a happy occasion. Failure to maintain compliance could result in everything from hefty fines to the loss of your license and ability to operate.
The professionals at ELLO are dedicated to helping cannabis businesses understand and implement enterprise-wide programs to attain and maintain compliance. If you have any questions, or would like to schedule a consultation, please reach out to us.