In November, 2016, I wrote a blog summarizing some of the important aspects
of California’s Adult Use of Marijuana Act (“Act”).
This blog serves to update you on California’s efforts to implement
the Act and what prospective licensees can do prior to the license application process.
Under the Act, the Bureau of Marijuana Control (“Bureau”) (formerly
the Bureau of Medical Cannabis Regulation) has been established as a regulatory
agency within California’s Department of Consumer Affairs. The Bureau
is responsible for licensing marijuana dispensaries and distributors under
the Act. The California Department of Public Health (“CDPH”)
is tasked with regulating the manufacturers of marijuana-infused edibles
and marijuana testing facilities under the Act. Likewise, the California
Department of Food and Agriculture (“CDFA”) is responsible
for licensing marijuana cultivators under the Act. The Bureau, CDPH, and
CDFA are collectively referred to herein as the “Licensing Agencies”.
California’s State Board of Equalization will collect the special
marijuana taxes authorized under the Act while California’s Controller
will allocate the revenue needed to administer the Act and provide funds
to maintain critical investments. Needless to say, it will take time for
these various state agencies to implement procedures that ensure an overall
statewide regulatory scheme conforming to the Act.
The Act calls for Licensing Agencies to begin accepting applications and
issuing licenses in January, 2018. However, before a license application
can be accepted by the applicable state agency or even completed by a
prospective licensee, the Licensing Agencies must closely analyze the
Act to determine how best to regulate adult use marijuana in an efficient
and expeditious manner. The Act requires its implementation to be handled
through California’s regulatory process. Licensing Agencies intend
to involve the general public and stakeholders (those other than the general
public with an interest in and/or a concern with marijuana licensing)
in this process. To achieve their regulatory goals of timeliness and efficiency,
Licensing Agencies must promulgate reasonable and necessary rules and
regulations consistent with the Act.
On February 10, 2017, the Bureau issued a press release announcing that
it is accepting applications for its Cannabis Advisory Committee (“CAC”).
The CAC will advise the Licensing Agencies on matters affecting adult
use marijuana, including the development of standards and regulations.
The CAC will be comprised of representatives of the marijuana industry
and labor organizations, appropriate state and local agencies, public
health experts, and other subject matter experts. Applications for CAC
membership will be accepted through March 30, 2017. The development of
rules and regulations necessary to implement the intent of the Act will
not begin until CAC members have been selected. California officials estimate
it could take until November, 2017 for the CAC to satisfy its mandate.
While the Act states that “Licensing [Agencies] shall begin issuing
licenses by January 1, 2018”, licensing could be postponed until
further into 2018, depending on when the CAC’s work is completed.
Local jurisdictions may opt out of the Act and prohibit otherwise legal
marijuana operations within their boundaries. Cities and counties electing
to allow some or all licensed activities authorized by the Act, can adopt
their own regulations - subjecting marijuana business to zoning and permitting
requirements. The timeline for passage and implementation of local regulations
is independent of the passage of rules and regulations at the statewide
level and will depend on each city/county’s regulatory processes.
A marijuana business will not be able to operate until it has met all state
and local licensing and permitting requirements. This means that a business
eligible for licensing by one or more state Licensing Agencies on January
1, 2018, will be prohibited from conducting its marijuana operations until
such time as the local jurisdiction approves the licensed marijuana activity.
Some jurisdictions, such as the City of Los Angeles, have cleared a path
for adult use sales under the Act, with the passage of Measure M earlier
this month. Measure M authorizes the permitting and regulation of marijuana
retailers and producers, increases the number of allowable locations,
and legalizes marijuana delivery services. In January, San Diego legalized
adult use marijuana dispensaries - limited for now to fifteen dispensaries
currently selling medical marijuana. San Diego’s City Council will
consider later this year regulations for cultivating, testing, manufacturing
(edibles), and distributing adult use marijuana within city limits.
While a prospective business may not yet apply for an adult use marijuana
license at the state and local level until later this year, there are
a number of things that can be done in the meantime to prepare for the
licensing process. These include monitoring the websites of the Licensing
Agencies and local jurisdictions where the business will operate for updates
on rulemaking and permitting efforts, establishing a business plan and
budget, forming the entity that will be associated with the marijuana
licensed activity and drafting the necessary corporate documents, arranging
for financing preferably from investors with whom the business owner has
a pre-existing relationship, and arranging for the leasing or purchasing
of the property where the business will be located.