Straight out of the gate in 2015, states with adult use marijuana laws on the books are now asking whether they still need their original medical marijuana laws and industries. Both Colorado and Washington are questioning the necessity of a medical marijuana system now that their regulated recreational marketplaces are in full force. Even Oregon, which legalized marijuana only a few months ago is hearing rumblings on this question.

When a medical marijuana state legalizes recreational marijuana under a regulated regime it ultimately will face the question of whether the two parallel industries (medical and recreational) should both continue to exist. This question becomes even more serious when the state’s medical marijuana industry is unregulated and uncontrolled. In those situations, the recreational businesses which are highly regulated and taxed do not think it fair to have to compete with their un-regulated medical marijuana counterparts. At that point, they usually start lobbying their state by pointing out that if the state wants to maximize its tax revenues from marijuana sales and ensure public health and safety, it should shut down the unregulated medical businesses entirely.

Unsurprisingly, competition between the illegal, the medical, and the recreational markets is pretty fierce at this point. Taxes on recreational marijuana alone are causing a good number of customers to access the existing illegal and medical markets. According to the Associated Press:

In Washington, the black market has exploded since voters legalized marijuana in 2012, with scores of legally dubious medical dispensaries opening and some pot delivery services brazenly advertising that they sell outside the legal system.

And the number of patients on Colorado’s medical marijuana registry went up, not down, since 2012, meaning more marijuana users there can avoid paying the higher taxes that recreational pot carries.

Both the Washington and Colorado governments are getting considerable heat from recreational marijuana businesses (and others) about their illegal and medical markets, and they are both looking at how they can rein in their medical systems and fix the big tax differential between medical and recreational marijuana without harming patients. But therein lies the rub. How can states equalize the tax structures between medical and recreational without negatively impacting legitimate patients who oftentimes lack the funds to purchase high-priced cannabis?

Various “fix” measures are on the table in each state; Washington’s Liquor Control Board is talking about increasing the number of licensed storefronts statewide and lawmakers are looking at massively updating the state’s existing medical laws. Colorado is planning to crack down on providers that give medical marijuana to those who should not qualify for it.

Alcohol once went through a very similar medical versus recreational dichotomy. During alcohol prohibition, one of the exceptions to the national ban on alcohol was its medicinal use as prescribed by a physician. One critical difference, however, is that the medicinal claims for alcohol were generally bogus, whereas there is little doubt that marijuana can be quite effective for certain medical conditions.

One thing is certain: no one state has legalization completely figured out and there is no “gold standard” that works for both adult use and medical patrons. Only time will tell for the fate of each of these marketplaces.

 

cbd utah multilevel marketing

Utah is a unique state for a variety of reasons, but recently it gained additional notoriety because the “world leader in essential oils” (based on global revenue), Young Living Essential Oils, announced it acquired Colorado-based Nature’s Ultra. Nature’s Ultra owns more than 1,500 acres of hemp farms in Colorado and produces “natural, organic, vegan approved, and gluten free” CBD oil with 0.0% THC. 0.0% THC is the key. Why? That is hard to explain without providing a little background about the “clean living” culture in Utah, the MLM (multi-level marketing) essential oil companies that call Utah home, and their drive for producing unadulterated essential oil products to compete with each other in the global marketplace.

Young Living’s acquisition of Nature’s Ultra is a big deal for Young Livng’s more than six million worldwide distributors. It is also a big deal for doTERRA, which is Young Living’s direct competitor (archrival is not an understatement) in this niche nutraceutical market, which also has more than three million distributors worldwide. To put it simply, in the world of essential oils, these market leaders vie for dominance as the company that can produce the purest, basest “essence” of oil from a living plant source. All plant sources are nearly sacred to these companies. Their oils comes from a variety of sources: the peel of a citrus fruit like lemon or orange, the leaves of an herb like peppermint or oregano, or from other parts of a plant like bark (cinnamon) or resin (frankincense). And in the case of Young Living, its CBD oil now comes from hemp plants.

Young Living and doTERRA have battled for more than a decade for market dominance. Young Living has the longer history. It was formed in 1993, and doTERRA’s owners are an offshoot of Young Living, comprised of former Young Living employees who formed doTERRA in 2008. The two companies’ global headquarters are only ten miles apart in Utah County. Each company has taken distinct but similar marketing positions. Young Living touts its products as meeting its “stringent Seed to Seal® Standards”, while doTERRA points to its CPTG® (certified pure therapeutic grade®) standard. There is currently no accepted objective industry standard. Both companies use products sourced from around the world. Both decry the other’s essential oils as less pure than the other. They are not the only essential oil companies in the world, but they are two massive forces in Utah and beyond.

But Young Living and doTERRA are not just essential oil companies. They are MLMs, each with an army of evangelist independent distributors (not employees!) who use their company’s products, train their own downline distributors, and are fiercely loyal to their brand. Utah is the unofficial MLM mecca of the world. Over 15 MLMs have global headquarters in Utah County (yes, just in Utah County). Utah MLMs are actively working to rebrand themselves because the term MLM has, after 30 years, become unpopular in Utah (or in the local vernacular, it has become a hiss and a byword). I recently learned from two midlevel executives at a Utah MLM company that MLMs no longer refer to their industry as MLM; they are now “direct-selling companies.” To me, it sounds a little like po-TAY-to vs. po-TAH-to, but as a student of marketing and branding, I understand the drive to continue to innovate, even if that innovation is a lateral move rather than a forward or upward move.

What does all of this mean for the world of direct-selling essential oils, especially CBD oil? It means that Young Living is about to deploy its massive army of worldwide distributors into our households and onto our social media streams to teach us the virtues of CBD oil. And it means doTERRA’s equally large army of distributors will likely follow suit. And CBD oil-derived products will be appearing with regularity in products available from other Utah MLMs like NuSkin, USANA, Nature’s Sunshine, Neways, and LifeVantage. This will have not just national but international implications because these companies operate in dozens of countries throughout the world through their distributors.

Utah has emerged as a dark horse in the business world for several reasons, but I cannot go into all of them in this post. As we reported last year, Utah joined the ranks of states in voter-approved (and legislature modified) legislation authorizing medical marijuana (but cannabis sounds better for historic and linguistic reasons). This stunned many outsiders (including some of my blogging colleagues) who are only tangentially familiar with Utah’s infamous notoriety as a state with a majority populace that is adverse not only to illegal drugs but also alcohol, tobacco, tea, and coffee use. But to many Utahns (and quasi-Utahns like me who have family roots in Utah or attended school in Utah), the move to legalize medicinal marijuana (not for smoking, only for ingestion, vaping, and topical application) fits perfectly within the general population’s mantra of seeking out the best things, researching to understand them, and taking the positive while abstaining from the negative (which is why smoking medical cannabis is banned). In sum, if there are positive applications of marijuana, like the production of CBD with less than 0.3% THC or – better yet – with 0.0% THC, then the majority of Utahns are more likely to embrace those “healthy” applications. Utahns are, like most humans, compassionate and almost assiduously seek to relieve the suffering of others by whatever means they can. First it will come through 0.0% CBD oil; second through medical marijuana used in its near-purest form for greatest effect and less chance of it being used merely for recreational purposes.

So Young Living’s acquisition of Nature’s Ultra is a logical step in its business model, and it is also a logical step for a company headquartered in Utah. Thanks to the passage of the 2018 Farm Bill, hemp and hemp-derived CBD oil can now generally be transferred across state lines (caveat, caveat, caveat). Colorado had a years-long head start ahead of Utah, so rather than try to make the Utah desert bloom with hemp plants, Young Living has taken a logical shortcut in this recent acquisition. The question remains of what steps doTERRA will take to match strides with Young Living. doTERRA’s distributors have naturally been inquiring when doTERRA will launch CBD oil so that those distributors can market the next best thing to their downline distributors and customers. But doTERRA has no publicized interest in CBD oil. Why not? That is a topic for a future post. In the meantime, the doTERRA distributors will have to source their CBD oil from their competitors.

 

Meet the new laws, mostly better than the old laws.
Meet the new laws, mostly better than the old laws.

They took their time, but the Washington legislature finally passed its budget for this biennium. This is good news for those who love regulators, as it means that your favorite Liquor and Cannabis Board (LCB) employees aren’t going to be temporarily laid off. As we expected, the Washington legislature passed HB 2136 and the Governor signed it into law. And we’re not wasting any time–HB 2136 goes into effect today, July 1. As SB 5052 and HB 2136, complimentary bills, now constitute our governing cannabis laws, here’s a rundown of some of the ways in which HB 2136 is going to change Washington State’s cannabis regime:

Taxes. The existing multi-tier tax structure is no more. We now have a 37% excise tax levied at the retail level, and there are no excise taxes for wholesale transactions. The tax is also structured differently in order to better deal with federal income taxes. The tax dollars are now “held in trust” by the retailer for the state, and the responsibility of the tax is placed on the consumer. In practice, this doesn’t really change anything from the consumer’s perspective, but it is huge for business owners. They no longer have to book the excise tax as revenue, so they also don’t need to pay federal taxes on it (remember, IRC 280e?). The number 37% is large, but the savings at the federal level still makes this change a big winner for the cannabis industry in Washington.

*Important note about the tax transition: Yesterday, the LCB sent out a message on its listserv telling all licensees and stakeholders how it will handle the tax transition. According to the Board in its message,

[For producers and processors] [y]our tax obligation will be determined by the date the inventory was transferred, not the date the manifest was generated.  All transfers initiated prior to July 1, 2015 are subject to 25 percent excise tax. All transfers initiated July 1, 2015 or later will not be subject to excise tax.

[For retailers] [e]ffective July 1, 2015, new functionality in the traceability system will handle the new tax rate as well as calculating the tax as a buyers’ tax rather than a sellers’ tax. It’s important to remember that it’s not just a rate change, it’s a complete change in how the tax is calculated (buyer tax vs. seller tax).

Local Tax Distribution. We will be dealing with this in a subsequent post, but suffice it to say that the new tax structure will provide some tax revenue to local governments with retailers physically located within their jurisdictions. This means that cities that allow cannabis will benefit while those that don’t won’t. It also means that, if cities want cannabis revenue, they won’t be banning marijuana businesses.

Bundled Transactions. The legislature is banning what the LCB has deemed a violation: bundling of marijuana and non-marijuana items in an effort to toy with the overall sale price and thereby decrease the excise tax payment. As always, the state finds a way to get its revenue. 

Local Buffer Zones. Cities and counties are able to decrease the mandated 1,000 foot buffer from state-mandated sensitive uses other than schools or playgrounds down to a minimum of 100 feet. This means that Seattle, if it wanted, could choose to allow marijuana businesses within 400 feet of public parks and libraries.

Third-Party Deliveries. Common carriers that apply for and get a new license from the LCB will now be able to deliver marijuana among producers, processors, and retailers. Third party delivery will bring some added efficiencies to the market and allow small producers to spend more time at their facilities and less time driving around the state delivering product.

Marijuana Clubs. The legislature is bringing the hammer down on marijuana clubs and vapor lounges. Washington’s general smoking ban always made these somewhat difficult to put together, but now we will have a rule banning any business that “conducts or maintains a premises for the primary or incidental purpose of providing a location where members or other persons may keep or consume marijuana on premises.” It’s sad for those that had been trying to run with the club as a business idea, so we’ll see if they lobby to try and get back some of those rights.

Residency. With the passage of HB 2136, the residency requirement now bumps up from 3 months to 6 months for principals of marijuana companies.

Researcher License. The bill also creates a new researcher license. “Marijuana researcher” means a person licensed by the state liquor and cannabis board to produce, process, and possess marijuana for the purposes of conducting research on marijuana and marijuana-derived drug products. The LCB is tasked with creating additional rules around this license, but we’re very likely to see increased private research of marijuana within the state which is ultimately a great thing.

While there are a few let-downs in HB 2136, the changes ultimately benefit the cannabis industry overall. The tax changes especially should really help across the board, leading to big savings for businesses throughout the industry. Ultimately, time will tell on how this bill changes marijuana businesses’ underlying economics going forward and the resulting impact on consumers.

medical marijuana vs. recreational marijuanaAnimosity between medical marijuana and recreational marijuana proponents has of late been increasing, especially in Washington State where the legislature recently enacted laws that will eventually lead to the the shutting down of all medical cannabis dispensaries. For more on this, check out Washington State Overhauls Its Medical Marijuana System.

We are troubled by this in-fighting both because we greatly respect and value both sides in it and because we would so much prefer that we be united in the fight to legalize. We believe cannabis should be easily available to anyone over 21, no matter what their reason for wanting it. We believe this for the simple reason that the choice on whether (and of course whether or not) to consume belongs to individuals, not governments.

Russ Bellville put it perfectly the other day in a column he wrote for High Times on the medical/recreational fissure that he too sees developing out there:

For me, this isn’t a battle about getting high or feeling well. It’s a battle about cognitive liberty and bodily sovereignty. Smoking pot is a civil liberty along with free speech, free religion, free association, bearing arms, reproductive choice and so on. Whether you’re a stereotypical tie-dyed, wake’n’bake stoner or a patient with Lou Gehrig’s disease, your rights are equal.

Seriously people, why can’t we all just get along?

Medical Marijuana vs. Recreational Marijuana: It's a Veritable War Out There
Medical Marijuana vs. Recreational Marijuana: It’s a Veritable War Out There

I’ve said it before and I’ll say it again, every state with existing medical marijuana laws that implements a parallel recreational regime will, at some point, have to grapple with whether the two industries should merge into one. Cue Oregon and its current dialogue over what to do about the Oregon Medical Marijuana Program (OMMP) and the state’s upcoming implementation of Measure 91, its recreational marijuana law.

Oregon is a bit of an oddball when it comes to regulation of medical marijuana since its legislature did not quite go all the way in providing industry oversight for the OMMP as only medical marijuana dispensaries (not growers and manufacturers) have to abide by Oregon Health Authority (OHA) regulations. As the result of a quasi-overhaul of the OMMP in 2013, the Oregon legislature opted to regulate only its medical cannabis dispensaries, leaving growers and manufacturers of medical marijuana pretty much unregulated and leaving patients without any quality assurance standards, verifiable product tracking, or thorough vetting process by the OHA. Under Measure 91, Oregon will likely have strict regulations covering advertising, seed-to-sale tracking requirements, quality assurance, packaging and labeling, and security (just to name a few).

So, how will Oregon harmonize its medical and recreational industries? If the Oregon Liquor Control Commission (OLCC) has its way, the two will be kept completely separate. Furthermore, according to The Oregonian, “if medical marijuana dispensary owners want to join the recreational cannabis market, the [OLCC] wants to make sure they’re tracking everything on the shelves from the start of production until it is sold,” and such tracking is not currently required for any medical marijuana business in Oregon.

Currently, there are 223 state-licensed medical dispensaries under the OMMP. On the recreational side, the OLCC has yet to issue to the public its first set of draft rules under Measure 91. Nonetheless, members of the OLCC have made clear that the co-location of medical and recreational cannabis operations in Oregon will not happen under its watch unless all cannabis comes through a regulated system tracked by the OLCC. Consequently, “one of the biggest issues facing Oregon lawmakers [is] whether to leave the popular medical marijuana program alone or fold it in some way into the regulated recreational market.”

Dealing with dual marijuana systems has never been easy, as Colorado and Washington are coming to find out. The one guiding set of principles on which all states with dual marijuana systems can rely is the August 2013 Cole memo. The no-brainer for states in the position of Oregon, Colorado, and Washington is that any marijuana program needs to abide by the eight tenets of the Cole memo — unregulated medical marijuana programs like those of California, Washington, and Oregon simply will not pass muster under that memo. Just standing alone, an inability to trace marijuana product should and likely eventually will trigger the ire of the Feds. This means that state legislatures everywhere must decide whether they want equally highly regulated dual systems or one strictly regulated system for both the recreational public and for legitimate medical patients. With politics and economics in play, this is a difficult decision for states and it is even worse for marijuana entrepreneurs who will face uncertain competition from their unregulated counterparts and/or the financial burden of having to run two different marijuana operations under two different regulatory regimes.

Even though Measure 91 explicitly states that the OMMP will go untouched by the OLCC, the legislature need not abide by this directive. Just like Washington, Oregon must decide whether to keep its medical program and ratchet up its regulations on growers and producers or scrap its existing medical program altogether or roll it into Measure 91 in some shape or form. Though Washington State is clearly leaning towards one regulated marijuana regime for medical and recreational, it is at this point anyone’s guess as to how this will play out in Oregon.

Regardless of the decision, patients and marijuana businesses will likely find themselves in the ever-changing middle.

Last year, I went to Las Vegas with two other cannabis business lawyers from my firm. We were there to attend the National Association of Tobacco Outlets’ (NATO) annual trade show held at The Paris Hotel. We at Canna Law Group thought it might be a good idea to go to such an event to try to gauge Big Tobacco’s interest in the emerging cannabis industry. Walking from booth to booth, it was obvious that Big Tobacco was embracing (dare we say, gripping onto?) the concept of vaporizing — branded as a new way to avoid actual cigarettes while still getting your tobacco fix, maybe even with a fruity flavor depending on your vape of choice. I could not help but think how most of the booths were virtually identical to the cannabis booths I have seen at various Canna-conventions and cannabis-oriented trade shows where vaping cannabis-based oils is already all the rage. There is a clear but uneasy synergy between marijuana and Big Tobacco, with the biggest differences being current laws and what goes into the vaporizers. Big Marijuana vs. Big Tobacco

Wanting to learn more, my colleagues and I began networking with the Big Tobacco folks. From your basic tobacco company representative there to pedal product to the big-wig executives with real decision-making power, the feelings regarding cannabis among those with whom we spoke were mixed at best. Some actually requested that we not discuss marijuana with them while others expressed mild to serious interest in investing in the Washington and Colorado cannabis marketplaces. Big Tobacco does not have much interest in getting into the marijuana industry.

Yet.

This past week a Bloomberg News article by Leonid Bershidsky, entitled, Big Tobacco’s Future as Big Marijuana, has been showing up on countless news sites on the web. The article is on the inevitability of Big Tobacco swallowing-up or destroying “mom and pop” marijuana businesses across the country and eventually totally dominating the marijuana industry, once legalization becomes more widespread. I vehemently disagree.  Marijuana may one day be a  natural step for Big Tobacco, but that day is a long way off and Big Tobacco’s inevitable domination is anything but certain.

Big Tobacco will not pull the trigger on marijuana until federal laws change and such a change is at least 3-5 years off. Congress is not likely to legalize marijuana federally until at least half of the states have themselves done so. Until that time there is just no way Big Tobacco investors will bet their financial lives on relatively unprofitable and federally illegal marijuana ventures.

Even if Big Tobacco wanted to get into marijuana markets right now, they would have trouble due to the various states’ tough restrictions on who can and cannot participate in the cannabis industry. Barriers to entry like residency requirements, investment caps, and actual industry experience would all work to keep out almost anyone from Big Tobacco. I also question how many cannabis medical patients would purchase marijuana for medical use from an entity associated with or backed by Big Tobacco. The same holds true for recreational users, though probably to a somewhat lesser extent.

Most importantly, I have faith that before Big Tobacco seriously considers jumping into marijuana, the moms and pops of the cannabis world will have expanded and become stronger despite federal prohibition. More and more individuals with serious business acumen are getting into the industry and their willingness to risk it all in the face of federal raids and asset forfeitures will give them all sorts of operational and branding advantages over Big Tobacco when it comes to brand recognition and advanced product development. Though I do not dispute that Big Tobacco will eventually make its way into the marijuana industry in some shape or form, it will not be anytime soon and the small marijuana businesses you see today will do just fine when that time eventually comes.

In a move that is simultaneously noteworthy and completely expected, Seattle city attorney Pete Holmes has issued a policy memorandum that speaks to the city of Seattle’s treatment of medical marijuana businesses moving forward. In no uncertain terms, Holmes says that all commercial medical marijuana operations not licensed pursuant to Initiative 502 and the state’s recreational cannabis laws are “felony operation[s].” What sparked this memo and will it change anything in the coming months

First, let’s take a quick look at Washington’s medical marijuana system. All of Washington’s marijuana laws, both medical and recreational, sit on top of the baseline that medical is still a controlled substance and is illegal unless some area of the law makes it legal. Initially decriminalized for medical users in 1998 by ballot initiative, the first measure to legalize medical marijuana businesses in Washington was Engrossed Substitute Senate Bill 5073, which passed the state legislature in April 2011. Rather than signing the bill, however, Governor Gregoire vetoed it, fearing that state employees could be charged for working directly with marijuana businesses. Medical marijuana law became a jumble, as a part of the law on the books referred to a patient registry that didn’t exist due to the veto.

It was in this climate that people started opening up medical marijuana businesses in Washington, using creative interpretations of what one could do with a “collective garden”. The disjointed law created a grey area that people jumped into. Fast forward to March 31, 2014. A Washington Court of Appeals held that since Washington never actually created its patient registry, all collective gardens were illegal, and patient participants were limited to affirmative defenses at trial as opposed to full legality for their participation in those gardens.

After that Court of Appeals ruling, we completely stopped taking on new medical marijuana work. Before the ruling, we had an argument that the corporate collective garden model was legal, but the precedent from the Kent case essentially took that argument away. For more on the impact of that ruling on Washington’s medical marijuana industry, check out MMJ Now Illegal In Washington State. Yes, Washington State.

Now we turn back to Seattle and to recent conversations. There is some inherent conflict between recreational marijuana stores and medical marijuana stores that are operating contrary to state law, but with at least the temporary blessing of the city, as most of the medical marijuana businesses in Seattle have done.  The taxes on recreational are extremely high, and the regulatory and compliance burden on recreational marijuana businesses is also quite substantial. There has been a big push at the state level to regulate medical marijuana with either a new system that is merged with I-502 or one that is parallel with I-502.

Mayor Ed Murray was understandably frustrated with the state’s failure to take care of the two track system in its last session and wanted to do something about medical businesses in Seattle, but Holmes is probably correct on this. Any positive legislation by the city may well cause a conflict to arise with the state, seeing as though the state has declared these businesses illegal for the time being. It’s not that Pete Holmes is announcing that as of today, medical marijuana businesses are illegal. He is simply clarifying that they were always illegal, but the city is less likely to tolerate them competing with licensed/regulated marijuana businesses now up and running.

Nothing is changing this very instant, but Holmes’s memorandum is simply more news that medical marijuana will need a miracle save from the legislature if it is going to survive in Washington’s largest city or anywhere else in the state.

For more on the inherent tension between recreational and medical marijuana regimes, I urge you to read this post entitled, Medical vs. Recreational Marijuana in 2015 and listen to Hilary Bricken, who will be on public radio later today discussing this very issue.

Emeryville cannabis laws

California has a long and complicated history with cannabis. In 1996, California voters made it the first U.S. state to legalize medical marijuana, and in 2003, the state expanded the right to collectives and cooperatives. But until recently the “Wild West” of U.S. cannabis lacked robust statewide regulations which left California cannabis companies subject to unclear rules and risk of federal shutdowns. We finally got these regulations through the Medical Marijuana Regulation and Safety Act that took effect on January 1, 2016 (more here). However, the state ultimately left control in the hands of local cities and counties (more here). At last count, California has 58 counties and 482 incorporated cities across the state, each with the option to create its own rules or ban marijuana altogether. In this “California Countdown” series, we will be writing on who is banning, who is waiting, and who is embracing the change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, its history with cannabis, its current laws, and its proposed laws, all to give you a clearer picture of where to locate your cannabis business within California, how to keep it legal, and what you will and won’t be allowed to do.

Welcome to the California countdown.


Emeryville is one of the newest California cities to consider ordinances allowing for medical marijuana businesses to operate within its boundaries. This marks a reversal for the city, which up until now prohibited all medical marijuana activities. Comments made by city council members during their March 15th meeting were largely in support of the proposed ordinances and were based on several factors including access for patients and the potential for local tax revenue. By next month, Emeryville residents could be receiving deliveries of medical marijuana directly to their homes.

Location. The city of Emeryville is located in Northern California, specifically within Alameda County and between the cities of Berkeley and Oakland. It is home to Pixar, Peet’s, Jamba Juice, and several biotech and software companies.

History with Cannabis. On August 17, 2006, Emeryville adopted a complete ban (Ordinance No. 06-007) of all medical marijuana activities within the city including dispensaries and both personal and commercial cultivation. At the time, the ban did not clearly cover delivery services.

On January 19, 2016, following the enactment of California’s Medical Marijuana Regulation and Safety Act (MMRSA), Emeryville adopted an urgency ordinance (Ordinance No. 16-001) to explicitly prohibit the delivery of medical marijuana within the city. At the same time, the city introduced an ordinance (Ordinance No. 16-002) to repeal and replace its existing regulations to more closely resemble the MMRSA. During that meeting, the City Council requested a study session to determine whether it should reconsider its complete ban on medical marijuana.

Current Law. Currently, all activities related to medical marijuana are stilled prohibited in Emeryville. Following the amendment to include delivery services, Section 5-28.04 of the city’s Municipal Code states:

“Marijuana cultivation, marijuana processing, marijuana distribution, which includes delivery as defined in Business and Professions Code Section 19300.5(m), and marijuana dispensaries shall be prohibited activities in the City, and no person shall conduct or engage in said activities, except where the City is preempted by Federal or State law from enacting a prohibition on any such activity or prohibiting a person from conducting or engaging in any such activity.”

Thus, Emeryville does not have any permitted dispensaries, cultivators, or delivery services operating within the city.

Proposed Law. On March 15, 2016, the Emeryville City Council met and discussed the findings of the study session requested in its January meeting. In the corresponding memorandum, the City Attorney reviewed the regulations of neighboring jurisdictions and the provisions of the MMRSA, and asked the City Council for direction on the following questions (which provide valuable insight into the issues California cities and counties are concerned about as they consider how to regulate medical marijuana businesses):

  1. Commercial Cultivation:
    • Should the City allow for commercial medical marijuana cultivation?
    • If yes, should commercial medical marijuana cultivation be allowed at the maximum size under state law?
  2. Limited Cultivation:
    • Should medical marijuana cultivation by a qualified patient or his or her primary caregiver be allowed as an incidental use to a residential use?
    • If yes, should limited medical marijuana cultivation be allowed by right or subject to a permit, e.g., an administrative permit?
  3. Recreational Marijuana: If recreational marijuana use becomes legal under state law, does the City Council want to consider allowing for commercial cultivation for recreational marijuana?
  4. For each business, distributor, manufacturer or testing, should the City allow for the business as it relates to medical marijuana?
  5. For each business, distributor, manufacturer or testing, should the City allow for the business as it relates to recreational marijuana?
  6. Brick and Mortar Medical Marijuana Dispensaries: should medical marijuana dispensaries be allowed?
    • If no, should medical marijuana dispensaries located outside of the City be allowed to deliver within the City?
    • If yes, how does the City Council envision the character of a medical marijuana dispensary, e.g., clinic vs. wellness center or both?
    • If yes, should the medical marijuana dispensary be allowed to deliver within the City?
  7. Mobile Medical Marijuana Dispensaries: should medical marijuana dispensaries that provide delivery-only service to patients be allowed within the City?
  8. Recreational Marijuana Dispensaries: If recreational marijuana becomes legal under state law, should the City allow for recreational marijuana dispensaries?
  9. Is the City Council interested in pursuing a specific business tax on medical marijuana, and on recreational marijuana, if recreational marijuana becomes legal under state law?
  10. Should the smoke and / or vapor from medical marijuana be regulated differently than the smoke of tobacco and other products?
  11. Should the smoke and/or vapor from recreational marijuana be regulated differently than the smoke of tobacco and other products?
  12. If yes to either question above, should smoking and/or vaping of marijuana in multi-unit residential buildings be regulated differently from smoking in single family houses?

In response, the council requested an urgency ordinance to immediately legalize deliveries of medical marijuana. The ordinance would not allow for marijuana delivery companies to be headquartered within city limits at this time, but instead provides clarification to existing delivery services in nearby cities and counties that they are authorized to deliver medical marijuana to patients in Emeryville. Council Member Davis expressed concern that delivery services have refused to deliver to Emeryville due to lack of clarity and that as a result patients are suffering. The request for an urgency ordinance was approved unanimously and could be effective as of the next council meeting, which takes place in less than a month on April 19th.

The council also discussed issuing a permit for a single medical marijuana dispensary to serve its population of roughly 10,000 people.  (The City Attorney’s memo noted that a proposed optimal ratio is one dispensary for every 10,000 in population.) They asked for more details on possible locations for the dispensary such that it could be converted to a recreational marijuana business at a later time. Finally, the council decided that it would keep its prohibition against marijuana cultivation, citing to space constraints, but is considering regulations to allow for marijuana labs which could make Emeryville a cannabis laboratory hub, in line with its existing biotech industry.

We’ll be waiting to hear the council’s thoughts on April 19th as Emeryville could soon be home to one lucky dispensary and multiple cannabis labs.  For now, medical marijuana delivery services in neighboring areas should take note that Emeryville may be open for cannabis business in the very near future.

The Oregon Tribal Cannabis Seminar is tomorrow
The Oregon Tribal Cannabis Seminar is tomorrow

Tomorrow at the Oregon Convention Center in Portland, Oregon, Robert McVay of our law firm will be speaking on cannabis issues as they relate to Native American Tribes. Robert will be doing so as part of this Law Seminars International seminar: Tribal Participation in the Cannabis Industry: Current Legal, Regulatory, Sovereignty, Cultural, And Business Issues; Opportunities And Pitfalls. If you cannot make it to Portland to attend in person, you can attend via webinar.

Robert (who is dual-licensed in Washington and Oregon and splits his time between our Seattle and our Portland offices) will be speaking on “Section 17 Corporations, Tribal securities, investment, and banking issues; taxation and the treatment of cannabis income under IRS 280E.”

Robert Odawi Porter also will be speaking at this event. Porter, a leading tribal law expert, will be speaking on “Public Law 280; state regulation and taxation of reservation activity; states that regulate recreational and/or medical marijuana vs. states where possession of small amounts is a civil penalty or where possession remains a crime.” Our firm teams up with Robert Porter on tribal cannabis issues and together we jointly (no pun intended) put on the first tribal cannabis seminar earlier this year.

We have written extensively on this blog regarding the intersection between tribal and federal laws as they relate to cannabis and on the issues with which tribes are having to contend as they decide what to do with cannabis on their lands. This page has a compilation of those articles.

We hope to see you at the Oregon Convention Center tomorrow.