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Habib is a lawyer in our San Francisco office, where his practice focuses on regulatory compliance, corporate, and transactional matters for cannabis companies.

When California was getting ready to legalize adult-use and medically commercial cannabis sales on January 1, 2018, we all knew it would be a bumpy ride. Going from the collective, cooperative, and non-profit models that governed marijuana operators (and I use the term “governed” loosely) prior to 2018, to a robust regulatory regime that was going to keep the federal government on the sidelines (hopefully) and better serve the public and the environment was never going to be easy.

When the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) was enacted in June of 2017, it merged the Medical Cannabis Regulation and Safety Act (MCRSA) and the Adult-Use of Marijuana Act (AUMA) into one regulatory regime. Under MAUCRSA there are three state agencies responsible for regulating and licensing cannabis operators: 1) The California Department of Food and Agriculture (CDFA), regulates cultivators, processors, and nurseries; 2) The California Department of Public Health’s (CDPH) Manufactured Cannabis Safety Branch regulates cannabis manufacturers; and 3) The Bureau of Cannabis Control (BCC) regulates distributors, retailers, delivery-only retailers, microbusinesses, temporary cannabis events, and laboratories.

In November of last year, all three agencies released their emergency regulations and licensing requirements (which we covered here and here). Upon gathering input from the public and cannabis businesses, all three state agencies made changes to their emergency regulations and readopted them last month.

In both the initial and readopted regulations, cannabis businesses were provided with a transition period that allowed for exceptions from certain regulatory provisions. The goal of the transition period was to grant cannabis businesses with a period of less stringent regulations so that they could sell cannabis products that were already in their inventory. The cost of compliance is a steep one and the transition period was an attempt to soften the blow. The readopted regulations made a number of changes (which we covered here) but what they didn’t change is the transition period’s termination date. The transition period ends on June 30, 2018, so starting on July 1 (which is also Canada Day!) the following regulations will apply:

July 1 is almost here!
  • Untested cannabis goods cannot be sold by a retailer and must be destroyed, nor will a retailer will be able to send the untested cannabis goods for testing.
  • Untested cannabis goods manufactured or harvested before January 1, 2018, in possession of a distributor that are owned by the distributor will have to be destroyed.
  • Untested cannabis goods manufactured or harvested before January 1, 2018, in the possession of a distributor owned by a manufacturer or cultivator may be returned to them. The manufacturer or cultivator could then sell the returned cannabis goods after sending them to a distributor and they pass all of the testing requirements.
  • All packaging and labeling of cannabis goods must be properly performed before being transported to a retailer. This also applies to cannabis goods that were in a retailer’s inventory before July 1. The only exception is that a retailer will be able to affix “FOR MEDICAL USE ONLY” for medicinal sales.
  • Cannabis goods in a retailer’s possession that do not meet packaging and labeling requirements will have to be destroyed.
  • All cannabis goods must be in child-resistant packaging, only having exit or secondary packaging be child-resistant shall no longer suffice.
  • Edible cannabis goods may no longer exceed 10 milligrams of THC per serving and may not exceed 100 milligrams of THC per package.
  • Non-edible cannabis products shall not contain more than 1,000 milligrams of THC per package in the adult-use market.
  • Non-edible cannabis products shall not contain more than 2,000 milligrams of THC per package in the medicinal market.
  • All products sold by a retailer will have to meet the CDPH’s requirements for ingredients and appearance.

In the long-term, the end of the transition period will benefit the public as the cannabis goods consumed will have passed stricter testing requirements. However, come July 1, you can expect to see less inventory on retailers’ shelves as there will inevitably be a number of cannabis goods that cannot pass the stricter testing requirements. Cannabis businesses that have been planning for the expiration of the transition period regulations are going to be the ones with good compliance programs and they’ll be able to take advantage of a less crowded marketplace as less forward-looking operators struggle to adapt.

One major concern for the California cannabis industry is whether there are enough licensed laboratories to meet demand. The BCC has currently issued temporary licenses to approximately twenty-nine (29) laboratories and whether they have the capacity to test all the cannabis products supplied by cultivators and manufacturers will have a direct impact on how fast a retailer can restock their inventory. In the short-term, you can expect to see some steep discounts from retailers as they’re forced to unload all their marijuana products that they’d have to destroy if not sold by July 1. Be ready for longer than normal lines at your favorite cannabis retailer on June 30!

“What do you do?”

When meeting someone for the first time this is a pretty standard ice-breaker. Usually the responses are pretty innocuous: “I’m in sales” or “I’m in IT”. But if you add “…in the cannabis industry” to those answers you’re bound to get a number of follow up questions. When I tell people that I advise businesses, investors, and ancillary service providers in the marijuana industry, without fail the first question that I get is “Aren’t you worried about the federal government?” I then go into discussion on the Rohrabacher-Blumenaur Amendment (formerly the Rohrabacher-Farr Amendment), the history of the Cole Memo (which although rescinded still plays an important role in banking), and the importance of complying with your state’s cannabis regulations. Lastly, I talk about the change in the national discussion and perception of the cannabis industry. Gone are the days of the “lazy stoner” stereotypes (although perhaps not for U.S. Attorney General Jeff Sessions). Instead we have sophisticated cannabis businesses providing products to a large and diverse section of America – with more and more states looking to legalize either medical or adult-use marijuana activities this year.

For those of us who follow cannabis bills in the U.S. Capitol and in our state legislative houses, it’s clear that there is momentum towards ending America’s shortsighted and draconian war on cannabis (we covered recent developments on the federal level here). While Republicans and Democrats in Congress can’t seem to agree on anything nowadays, support for individual states to regulate cannabis activities as they see fit for their constituents is one of the few areas where bipartisan support exists. Every day, more Republicans in Congress are signing on as sponsors to bills that will support the cannabis and hemp industries (we see you Mitch McConnell!). And now we can add to the list of cannabis supporting Republicans: President Donald Trump?

Could Trump actually point us in the right direction?

Just last week, the President, while boarding a helicopter for the G-7 summit in Canada, mentioned his support for what Senator Cory Gardner (R-CO) is doing. What exactly is Senator Gardner doing you ask? He, along with Senator Elizabeth Warren (D-MA), and Representatives David Joyce (R-OH) and Earl Blumenauer (D-OR), have introduced the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act. You’ll recall that Senator Gardner didn’t take too well to A.G. Sessions rescinding the Cole Memo, so he vowed to block all Department of Justice appointments in return. After meeting with the President, Sen. Gardner put an end to his blockade (which we covered, here) when the President assured him that “he will support a federalism-based legislative solution to fix this states’ rights issue once and for all.” At the time of the meeting there was no agreement as to what the “federalism-based legislative solution” would look like. Today there is. Here’s a list of what the STATES Act would and wouldn’t do:

  • It would amend the federal Controlled Substances Act (“CSA”) so that the CSA would not apply “to any person acting in compliance with state law relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana.”
  • It would also amend the CSA so that the same exclusion would apply to persons acting in compliance with the law of a federally recognized Indian tribe within its jurisdiction.
  • It would deschedule industrial hemp from the CSA entirely.
  • It would make access to banking easier for cannabis businesses as state legal cannabis sales and transactions would no longer be considered trafficking.
  • It would not change the law in states that continue to criminalize cannabis activities.
  • It would not apply to any of the other substances identified in the CSA.
  • It doesn’t guarantee that President Trump will keep his word.

That last point isn’t actually written into the bill, but it’s the 800-pound gorilla in the room that no one can ignore. The President, to be polite, has had a tenuous relationship with the truth and keeping his word, so it’s far from certain that he will throw his support behind the STATES Act. An off-the-cuff remark before meeting with G-7 allies (or are they adversaries now?) does not constitute unwavering support. We’ll have to see more consistent and direct support from the President before we can feel confident that the STATES Act will become law. The President’s support is necessary because he’s still very popular with the Republican base and can therefore give recalcitrant Republicans in Congress cover if they’ve been cannabis opponents previously.

Let’s keep our fingers crossed that the North Korea Summit meeting goes well (who cares about cannabis legalization if nuclear war’s broken out?), that Congress pushes this one through, and that the President carries that high over to the STATES Act.

Tomorrow, June 5th, Californians will go to the polls and vote on a number of state and local races, along with tax measures and other proposed laws. Cannabis will play a large role in many of them.

In the gubernatorial primary race the two favorites, Lt. Governor Gavin Newsom and former Los Angeles Mayor Antonio Villaraigosa, are both Democrats and they both support the cannabis industry and social justice reforms to right the drug wars’ wrongs. California Treasurer John Chiang is also running for governor and he has made increasing banking opportunities (which we covered here) for cannabis businesses one of his most pressing goals. Even if Mr. Chiang doesn’t win, we hope he continues making progress on this front as lack of access to banking severely hampers cannabis business owners and needlessly creates a danger to public safety. The Republican candidates for governor, John Cox and Travis Allen, hold the same traditional shortsighted and draconian Republican position: cannabis is bad, lock everyone up. To quote the current eloquent speaker in the White House: SAD! Although both Republican candidates are longshots to make the statewide election in November, one of them could get lucky if the Democratic favorites split a large number of votes. That’s because California has an open primary system with the top two vote getters, regardless of party affiliation, moving on to the November election.

Keep the momentum going, California!

Making sure the top two gubernatorial candidates support the cannabis industry and social justice reforms is extremely important but there also a number of other races and measures to keep an eye on tomorrow:

  • Republican Congressman Dana Rohrabacher faces what looks like a tough race as he’s being challenged by a Republican and a Democrat. Mr. Rohrabacher is one of the biggest Republican supporters of the cannabis industry (If you’ve never heard of the Rohrabacher-Blumenaur amendment, we covered that for you here.) The best-case scenario is that Mr. Rohrabacher and one of the Democratic candidates receive the most votes. Worst-case scenario is that Mr. Rohrabacher and the other Republican candidate, Scott Baugh, move on the November election and Mr. Baugh wins. Mr. Baugh has chastised Mr. Rohrabacher’s support of the cannabis industry, so a Baugh-Blumenaur collaboration is highly unlikely.
  • Residents of the Southern California City of Jurupa Valley will vote on whether to allow commercial cannabis activities in certain commercial zones.
  • Ballot Measure CC in the City of Pasadena would authorize up to six retailers, four cultivators, and four testing laboratories to operate in the City. There will also be a cannabis tax measure on the ballot.
  • The City of San Rafael, which we recently covered in our California Cannabis Countdown series, will also place a tax measure on its ballot. Measure G would authorize the City to tax cannabis business up to 8%.
  • There’s also a tax measure on the County of Santa Barbara’s ballot, however Measure T’s passage carries more than just tax consequences – if Measure T fails then the cannabis ordinance passed by the Board of Supervisors that would allow commercial cannabis activities will not go into effect.
  • The County of San Luis Obispo will also put forth a tax measure on its ballot and just as in Santa Barbary County, if the tax measure doesn’t pass then commercial cannabis businesses will not be able to operate in SLO County.
  • Yolo County is proposing a tax measure that would place an initial four percent (4%) cultivation tax and an initial five percent (5%) tax on all other cannabis businesses.

There are other marijuana related measures that will be on ballots throughout California this Tuesday and it’s extremely important for current cannabis business owners, future entrepreneurs, and cannabis industry supporters to pay close attention to the language of the ballot measures–especially tax measures tied to the enactment of cannabis ordinances–and the cannabis positions on those running for elected office. The cannabis industry has made great strides recently and now is not the time to let up. Get out there on Tuesday and vote!

california cannabis marijuanaThe movement to legalize cannabis in the United States has come a long way since Californians started it all with the Compassionate Use of Act of 1996 (“Prop 215”). For many years after Prop 215, the pace of change was glacial. In California, it wasn’t until 2004 (8 years after Prop 215) that the California State Legislature passed Senate Bill (“SB 420”). SB 420 recognized the rights of qualified patients and their caregivers to collectively or cooperatively cultivate medical cannabis. Then it took an additional four years until the California Attorney General (who at the time was Jerry Brown, the state’s current governor) released the state’s guidelines (“Guidelines”) on medical cannabis enforcement in 2008.

The Guidelines created the framework for non-profit mutual benefits corporations, collectives, and cooperatives to provide medical cannabis to their patient members. Although the Guidelines were a step in the right direction, they still left many medical cannabis operators uncertain as to what was allowed. It took another seven years before California substantively addressed the cannabis industry when the State Legislature passed the Medical Cannabis Regulation and Safety Act in 2015 (“MCRSA”). But ever since the passage of the MCRSA and the Adult Use of Marijuana Act in 2016, the pace of change in California’s cannabis regulatory landscape is perhaps best described by a quote from Ernest Hemingway’s “The Sun Also Rises.” One of the characters, when asked how he went bankrupt, replied, “Two ways. Gradually and then suddenly.”

In California, we are firmly entrenched in the “suddenly” camp of cannabis regulations. The main reason cannabis operators are seeing a flurry of laws and regulations is because the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) allows for both state and local governments to regulate and license cannabis businesses. Keeping up with the state’s dual licensing regime is a never-ending endeavor. As an example, the state licensing agencies – the Department of Food and Agriculture, the Department of Public Health and the Bureau of Cannabis Control – just recently released and published readopted emergency regulations (which we covered, here).

This week we also saw important legislation make progress on the state and local level. They are as follows.

State Level:  AB 2641 and Temporary Retailer Licenses.

On the state level we saw Assembly Bill 2641 make it out of committee. We previously covered AB 2641, here, but a brief recap will be helpful. Under MAUCRSA only a retailer, delivery-only retailer, or microbusiness (“Retailers”) can sell cannabis products to the public. Currently, cannabis cultivators and manufacturers have no way to directly sell their cannabis goods to their consumers – they are completely reliant on Retailers at the point of sale to tell the public about their product and company mission. AB 2641 would allow certain cultivators and manufacturers the ability to obtain temporary retailer licenses. These temporary licenses would authorize cultivators and manufacturers to sell their products directly to their consumers at temporary cannabis events that are authorized by the appropriate local jurisdiction. AB 2641 needs the approval of two thirds of the State Assembly for it to pass. You can find information on how to support AB 2641 through the California Growers Association website.

Local Level: Sonoma County Recommendations.

As previously mentioned, California is a dual licensing state and we cover local changes in our California Cannabis Countdown series. Each California city and county have their own internal processes for passing cannabis ordinances in their jurisdictions. For example: In Sonoma County, the Planning Commission, the Board of Supervisors (and their Ad Hoc Cannabis Committee), the Cannabis Advisory Group, and the public (through hearings and workshops) all play a role in shaping cannabis policy in Sonoma County. Ultimately it comes down to the Board of Supervisors and we covered one its more contentious hearings here. The County’s Permit and Resource Management Department just recently released a staff report (“Report”) with proposed changes to the county’s cannabis ordinance. Here are some of the Report’s recommendation highlights:

  • Allow adult-use cannabis operations;
  • Extend the life of new cannabis permits from one to two years;
  • Allow transferability of permits between operators;
  • Add processor, microbusinesses, self-distributor transport-only, and shared-use manufacturing as cannabis license types;
  • Amend whether a conditional use permit or zoning permit is needed depending on the zone and parcel size of the property; and
  • Create a cannabis inclusion zone for cultivation applicants that do not have eligible zoning, but which have unique characteristics that may make them eligible for a conditional use permit.

You can download the full Report from the County’s cannabis page, here. The Planning Commission will hold a hearing to discuss the Report’s proposals on June 7th at 1:30pm. AB 2641 and Sonoma County’s Report can provide instrumental lifelines to many cannabis businesses, so let’s do what we can to ensure they pass. Keep checking in as we’ll be sure to keep you posted on their developments.

california marijuana cannabis

Whenever government enacts new regulations there will always be some people and businesses that will be unhappy with the new changes. So, it came as no surprise when California embarked on its mission to create a state licensing regime for cannabis businesses (as well as personal use) that issues would arise. What made enacting cannabis regulations in California so difficult is that ever since Californians voted for the Compassionate Use Act in 1996 (a/k/a Prop 215), cannabis cultivators, manufacturers, and dispensaries were operating without regulations in what everyone conveniently called the legal “grey” area (a Michael Cohen area of practice).

That all changed when the state legislature passed the Medical Cannabis Regulation and Safety Act (MCRSA) in 2015 and a majority of the good people of California voted in favor of the Adult Use of Marijuana Act in 2016 (AUMA). In June of 2017, California Governor Jerry Brown signed into law Senate Bill 94 (a/k/a the Medicinal and Adult-Use Cannabis Regulation and Safety Act a/k/a MAUCRSA). MAUCRSA merged medical and adult-use cannabis activities under one regulatory regime and empowered three state agencies to license and regulate the commercial cannabis industry: The California Department of Food and Agriculture (cultivators, processors, and nurseries); the Department of Public Health (manufacturers); and the Bureau of Cannabis Control (distributors, retailers, delivery-only retailers, microbusinesses, and testing labs). Each state agency released their emergency regulations in November of 2017, which we covered for cultivators, manufacturers, distributors, and retailers.

The emergency regulations were quite the departure from the previously unregulated “grey” market of the previous twenty years. They were however not without some hiccups: Such as the removal of the cultivation acreage cap or the steadfast intransigence of local jurisdictions in licensing commercial cannabis activities.

After the release of the emergency regulations, representatives from the three state cannabis licensing agencies travelled up and down the state to solicit public input on the regulations. The reason the state continued to solicit feedback from the public was due to the fact that the emergency regulations were actually just temporary regulations. All three state agencies were required to release permanent regulations later this year – when exactly the permanent regulations were going to be released was anyone’s guess. While current cannabis businesses and aspiring entrepreneurs have been busy figuring out how to navigate the licensing landscape, the state just went ahead and made changes to the emergency regulations. Just this Friday all three state agencies released new emergency regulations (nothing like a regulation drop on a Friday!). We’ll cover the changes in greater detail in future posts (stay tuned) but here are a couple of highlights:

  • Applicants can submit one application (and pay one fee) to obtain both an adult-use and medical cannabis license. Previously you had to submit two applications and pay two separate licensing fees if you wanted to operate in the medicinal and adult-use market. This applies to all three licensing agencies.
  • A licensee can now engage in commercial cannabis activities with any licensee, regardless of medical or adult-use designation. This is a permanent extension of the transition period in the emergency regulations that allowed medical cannabis licensees to contract with adult-use licensees and vice versa (the transition period was set to expire on July 1, 2018). This also applies to all three agencies.
  • The Bureau of Cannabis Control’s definition of financial interest holder was amended to specifically state that anyone that has an agreement to receive a portion of the profits of a commercial cannabis business will be considered a financial interest holder (there’s an exception for diversified mutual funds, blind trusts, and similar financial instruments).
  • The BCC regulations also specify that licensees authorized for retail sales may not sell or deliver cannabis goods through a drive-through window.
  • A retailer’s delivery employee can now carry cannabis goods valued up to $10,000 while making deliveries (the cap was previously set at $3,000).
  • The Bureau of Cannabis Control reduced the annual license fees for its licensees.
  • The Department of Food and Agriculture revised how it will measure canopy for indoor, mixed-light, and outdoor license types.
  • The Department of Public Health (DPH) formally incorporated the regulations for shared-use facilities, which we covered here.
  • The DPH specifically removed tinctures from the definition of a product containing alcohol. However, tinctures shall not be sold in a package larger than two fluid ounces and shall include a calibrated dropper or other measuring device.

The public will now have all of five days to comment on the re-adoption of the emergency regulations. The five day window for public comment will begin once the California Office of Administrative posts the emergency regulations on its website – which it can do no earlier than May 25, 2018. When these updated emergency regulations are formally adopted the licensing agencies will have 180 days to develop their final regulations. Be sure to check in as we update you with even more details on these emergency regulations and how they may impact your cannabis business.

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 Cannabis Countdown series, we cover who is banning cannabis, who is embracing cannabis (and how), and everyone in between.  For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your California cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on the Town of Truckee, and before that the City of Cotati, the City of San Luis Obispo, the City of Redding, the City of San Rafael, the City of Hayward, Alameda County, OaklandSan FranciscoSonoma County, the City of Davis, the City of Santa RosaCounty and City of San BernardinoMarin CountyNevada County, the City of Lynwood, the City of CoachellaLos Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey Countyand the City of Emeryville.

Today’s post is on the city of San Jose.

Welcome to the California Cannabis Countdown.

Surely there’s room for a few more licensed cannabis businesses?

Location. San Jose is the third most populous city in California and the largest city in Northern California. Located south of San Francisco and Oakland, San Jose is the county seat of Santa Clara county and the soon to be home of a massive new campus for Apple. San Jose is also home to the San Jose Sharks (get them next year) and the fervent fans of the San Jose Earthquakes.

History with Cannabis: Back in 2011, the City Council began the process to enact a land use and regulatory ordinance to govern  medical marijuana operations. Unfortunately, the City Council ended up suspending the land use ordinance and then repealing the regulatory ordinance – the effect of which meant that all medical marijuana collectives, cooperatives, and dispensaries operating in San Jose were doing so illegally. Then in June of 2014, the San Jose City Council passed their Medical Marijuana Program (“MMP”). The MMP was an amended attempt to correct the City’s failure to pass a medical marijuana ordinance back in 2011. The MMP went into effect on July 18, 2014 and gave medical collectives up until October 17, 2014 to submit their applications with the City.

At the time the MMP was passed there were an estimated 78 collectives operating in the San Jose, of which 50 collectives submitted applications with the City. Of those 50 medical marijuana collectives that submitted applications, only 16 were able to successfully navigate the application process and maintain their license in compliance with the San Jose’s regulations. Since the passage of the MMP, there have been no new cannabis licenses issued — only the 16 registered collectives have been authorized to cultivate, manufacture, and sell medical cannabis within city limits.

In November of 2017, the City Council passed Ordinances 30029 and 30030 authorizing adult-use cannabis activities. However, the adult-use ordinances did not open up licensing to new applicants — it only allowed the previously registered medical collectives to operate as adult-use businesses as well. These registered collectives have had a really good run as the only cannabis operators in town (legal operators anyway) but that may change as the City Council is considering opening registration to new cannabis operators for the first time since the MMP.

Proposed Cannabis Laws: This Monday, May 21 (6pm at City Hall), the City Council will hold a public hearing to discuss allowing new cannabis businesses to register and operate in San Jose. The City Council is considering allowing new businesses to register for the following types of cannabis licenses:

  • Manufacturing (volatile and non-volatile).
  • Distribution.
  • Testing laboratories.
  • Additional cultivation licenses are not currently on the agenda.

These are just the additional stages of the discussion that’s set to take place. It’s still to be determined whether the City will cap the number of additional licenses (or remove some of the proposed license types altogether) so it’s especially important for cannabis entrepreneurs to show up on May 21st and voice their opinions. All in all, it’s about time that new cannabis businesses get a chance to enter the cannabis market of California’s third largest city.

If you’ve been following the state of affairs of commercial cannabis licensing in California, you know that it really is a tale of two cities (or counties). Both the Medicinal Cannabis Regulation and Safety Act (passed by the California state legislature in 2015) and the Adult Use of Marijuana Act (passed as a ballot measure by a majority of Californians in November of 2016) granted absolute discretion to local jurisdictions in determining how they wanted to regulate commercial cannabis activities. This deference to local jurisdictions was included in Senate Bill 94 (a/k/a the Medicinal and Adult Use Cannabis Regulation and Safety Act), which merged California’s medical and adult-use cannabis regulations under one regulatory regime. Although granting local jurisdictions the authority to regulate cannabis businesses was a necessary concession to get statewide cannabis legislation passed, in practice it’s the local jurisdictions that have been a significant impediment to bringing cannabis operators into the regulated market (which we’ve covered here and here).

Very few of California’s 482 cities and 58 counties are allowing medicinal and adult-use commercial cannabis activities within their borders. Instead of seeing cannabis businesses operating evenly throughout the state, what we’re seeing is an undue concentration in just a select few jurisdictions. The fact that so many California jurisdictions have outright commercial cannabis bans in place is forcing cannabis operators to relocate to cannabis friendly jurisdictions if they want to participate in California’s legal cannabis market. Cities and counties that have been open to cannabis businesses are now starting to rethink their approach as they’ve been inundated with the number of cannabis applications they’ve received. We’re seeing this trend take shape in Sonoma county and the city of Sacramento may be next.

sacramento cannabis marijuana
Will Sacramento turn back the clock on cannabis?

Sacramento falls squarely in the camp of a cannabis-friendly jurisdiction (for now): It licenses both adult-use and medical cannabis businesses to go along with all seed to sale license types (outdoor cultivation and volatile manufacturing are the only prohibited cannabis activities). When you combine: the size of Sacramento’s population, its place as the state’s capital, its relatively inexpensive cost of living (compared to the Bay Area, Los Angeles, and San Diego), and their willingness to license all types of cannabis activities, then it shouldn’t come as a surprise that cannabis operators have been flocking to Sacramento.

Unfortunately, Sacramento legislators have noticed the inbound cannabis migration as well, and they do not seem happy about it. Like most California jurisdictions, Sacramento only allows commercial cannabis businesses to operate in a couple of zoned districts. According to the city these districts are being overwhelmed by cannabis applications.

Sacramento city legislators feel so strongly that some neighborhoods are home to too many cannabis businesses–specifically the area within the Power Inn Alliance Business Improvement District (PBID)–that they’ve introduced a proposed ordinance to curtail the number of cannabis businesses in the city. The proposed ordinance would prohibit a cannabis business from being issued a permit if the city’s cannabis decision maker finds that the proposed site will result in an undue concentration of cannabis establishments in the area. The proposed ordinance defines undue concentration as follows:

  • Any cannabis cultivation that it is located within the area bounded by Power Inn Road to the west, Folsom Boulevard to the north, and the city limits to the east and south; and will result in more than 2.5 million square feet of building floor space approved by a conditional use permit for cannabis cultivation use in that area; or
  • Any cannabis production facility (cultivation, distribution, or non-volatile manufacturing) in all other parts of the city that is located on a parcel within 600 feet of another parcel having a use permit for cannabis production or a cannabis dispensary, unless the decision-maker determines that there is an overriding public benefit in approving the use permit for the proposed location.

The PBID district already has approximately 2.8 million square feet in cannabis cultivation conditional use permit applications pending and over 1,169,090 square feet of cannabis cultivation has already been approved. If the proposed ordinance passes, then it will only be a matter of time before Sacramento closes its doors to new cannabis operators.

Unfortunately, this trend of curtailing cannabis permits is likely to become more common so long as a vast swath of California continues to prohibit commercial cannabis businesses from entering the legal market. Sacramento will hold hearings on its proposed ordinance tomorrow, May 8th (at 3pm before the Law and Legislation Committee) and on Thursday, May 10th (at 5:30pm before the Planning and Design Commission). If you want to make sure Sacramento keeps its doors open to cannabis businesses, it’s imperative you show up.

Last week I wrote about how the United States is close to approaching the tipping point when it comes to ending the federal government’s prohibition on cannabis. Legalization is long overdue. And just this week, U.S. Attorney General Jeff Sessions, while testifying before the U.S. Senate, surprisingly said that cannabis should be researched and that there may be some benefits to medical marijuana. We’ll take a lukewarm comment from the man that said “good people don’t smoke marijuana” and take that to the bank. Which brings me to the topic of today’s post, banking (a transition as smooth as my middle school dance moves).

california cannabis banking
Will California clear a way for banking?

It’s no secret that many cannabis operators have to operate as cash only businesses since many financial institutions still refuse to offer banking services to the cannabis sector (which has led to an increase in interest in cryptocurrencies). In California, many banking institutions that were considering openly banking cannabis businesses decided to remain on the sidelines once A.G. Sessions rescinded the Cole Memo this January. However, like the slow but forceful gravitational pull of the moon, we’re starting to see tide shift towards more banking opportunities on the horizon.

Part of the shift has to do with fact that the cannabis licensing agencies in California (the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health) will start issuing annual licenses in May. To date, all of these agencies have only issued temporary permits, which required little more than a local permit, a location, and a premises diagram. The application for an annual license requires much greater detail. Although some applicants may balk at the amount of information they must provide, the fact intensive nature of the application process will undoubtedly help cannabis operators obtain banking services. A cannabis business owner that has received an annual permit from the state, can use that permit as a stamp of approval when walking into a bank to open an account. Possession of an annual license will signify to banks that you’ve passed a background investigation and proven to the state that you have the procedures in place to run a compliant cannabis business. Don’t lose sight of that fact as you’re cursing all the hoops you’re jumping through.

Another step in the right direction when it comes to opening banking services to the cannabis industry is the progress of Senate Bill 930 in the California state legislature. SB 930 was first introduced by State Sen. Robert Hertzberg (D-Van Nuys) on January 25, 2018, and was approved by the Governance and Finance Committee last Wednesday. SB 930 would provide for the licensure and regulation of cannabis limited charter banks and credit unions whose sole purpose would be to provide banking services to the cannabis industry. SB 930 is more workable and has a stronger likelihood of success than the prospect of a state backed bank, which we last discussed here.

In order for SB 930 to be successful, it is paramount that the FinCEN guidance issued by the Department of Treasury remain in place (see here for the importance of the FinCEN guidance). The bill would also create the Cannabis Limited Charter Advisory Board (“Board”) that would hold public hearings, submit reports of enforcement activities, and provide guidance on specified investment activities. The Board will be comprised of the state Treasurer (you can find our analysis of the Treasurer’s banking report, here), the state Controller, and Chief of the Bureau of Cannabis Control. SB 930 would also authorize charter banks and credit unions to issue special purpose checks for the following:

  • To pay fees or taxes to the state or local jurisdiction;
  • To pay rent on property that is associated with the account holder’s cannabis business; and
  • To pay a vendor that is located in California for expenses related to goods and services associated with the account holder’s cannabis business.

SB 930 will still have to clear some procedural hurdles before it’s in front of the full Senate for a vote, but this is definitely another step in the right direction to ease the logistical burden – and enormous public safety concern – that dealing in all cash poses on cannabis businesses. SB 930 is yet another piece in the fight against the federal government’s unjust war on cannabis. Eventually the final blow will have to come from the federal government, but in the interim California, along with many other states, will continue to lead the way.

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 Cannabis Countdown series, we cover who is banning cannabis, who is embracing cannabis (and how), and everyone in between.  For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law to give you a clearer picture of where to locate your California cannabis business, how to keep it legal, and what you will and won’t be allowed to do.

Our last California Cannabis Countdown post was on the City of Cotati, an before that, the City of San Luis Obispo, the City of Redding, the City of San Rafael, the City of Hayward, Alameda County, OaklandSan FranciscoSonoma County, the City of Davis, the City of Santa RosaCounty and City of San BernardinoMarin CountyNevada County, the City of Lynwood, the City of CoachellaLos Angeles County, the City of Los Angeles, the City of Desert Hot SpringsSonoma County, the City of Sacramento, the City of BerkeleyCalaveras CountyMonterey County and the City of Emeryville.

Today’s post is on the town of Truckee.

Welcome to the California Cannabis Countdown.

LocationTruckee is an incorporated town in Nevada County. Truckee is about 200 miles northeast of San Francisco and is just a short drive to Lake Tahoe. With its historic (and often bustling) downtown, background views of the Sierra Nevada mountains and proximity to world class ski resorts in the Lake Tahoe area, Truckee has become an attractive tourist destination. If you’re driving during the winter make sure to bring snow chains as you don’t want to veer off the road, get lost, and meat (pun intended) the fate of the Donner Party.

california cannabis marijuana Truckee
Is delivery coming to Truckee?

History with Cannabis: Truckee is known for its open beautiful landscape but no one would ever say it’s a jurisdiction that’s been open to cannabis. Dating back to 2005 the city adopted an interim ordinance prohibiting dispensaries. In 2008 the Community Development Director released a statement that dispensaries were not allowed under Truckee’s Development Code. It was only in 2015, when the California state legislature passed the Medical Cannabis Regulation and Safety Act and the Adult Use of Marijuana Act was going to be placed on the 2016 statewide ballot, that Truckee decided to revisit its prohibitionist stance towards cannabis. At this point the Town Council began to earnestly look into the feasibility of regulating cannabis businesses in jurisdiction. To gauge community feedback the Town Council held public workshops in February, March, April, and May of 2017. After those workshops the Council held three public meetings that focused on the following options: 1) continued prohibition; 2) allowing only commercial medicinal access; or 3) allowing medicinal and adult-use access. In the end the Truckee Planning Commission developed Resolution 2018-04 (“Resolution”) that would authorize delivery services.

Proposed Cannabis Laws: The proposed Resolution is by no means a gigantic step for Truckee cannabis businesses, but it’s still a step in the right direction. And a step forward is still better than the status quo of outright prohibition. Here are some of the Resolution’s highlights:

  • Allows for both medical and adult-use delivery services;
  • All other cannabis activities are prohibited (unfortunately);
  • The buffer from schools, day care centers, and youth centers would be 1,000 feet as opposed to the state’s 600 foot requirement;
  • The delivery service shall be in a fixed structure and not open to the public;
  • There are no caps on the number of licenses;
  • A license is only transferable with the approval of the Community Development Director; and
  • The term of license is for perpetuity so long as the licensee is operating in compliance with local and state law.

If you’ve been following the slow rollout of cannabis licenses from California’s state agencies, you know that the biggest impediment to securing a cannabis permit has been local regulations. Would we like to see local jurisdictions reasonably regulate all seed to sale license types? Of course we would, but that doesn’t mean that we won’t encourage smaller locales that decide to take their first step into regulating cannabis. This is especially true when a local jurisdiction is putting in place regulations to provide patients and consumers with access to tested cannabis as opposed to forcing residents to buy from the black market.

Making sure Californians have access to cannabis through delivery services has also faced initial hurdles in 2018, so having smaller locales, like Truckee, authorize cannabis delivery will benefit all legal cannabis operators along the supply chain. A hearing on the Resolution was held two weeks ago, but the Planning Commission continued the matter to the next Commission meeting, which will be held on April 26 at 6pm. We’ve seen how public support (and opposition) can sway undecided local legislators so if you want safe access to cannabis in Truckee, it’s paramount that you show up at the Planning Commission meeting!

marijuana cannabis federal policy
Let’s hope so, when it comes to prohibition.

The election of Donald Trump as president of the United States caught many pundits and prognosticators off guard. President Trump’s victory also instilled a level of uncertainty in America’s burgeoning state-legal cannabis industry. During the presidential campaign, Trump routinely professed his adherence to states’ rights when it comes to cannabis legalization (at least for medical cannabis activities). Once elected, however, President Trump appointed known cannabis prohibitionist Jeff Sessions to be his choice as U.S. Attorney General for the Department of Justice (DOJ) and cannabis operators went from feeling uncertain to outright fear.

It now appears that those fears may have been unfounded. After his confirmation, Sessions didn’t immediately seek to enforce federal laws against marijuana operators (to the pleasant surprise of many in the cannabis industry). The honeymoon lasted until January 4, 2018. Just four days into adult-use cannabis sales being legal in the state of California, Sessions formally rescinded the Cole Memo and the cannabis industry was once again thrown into turmoil. The rescission of the Cole Memo, when added with the Environmental Protection Agency’s refusal to register pesticides on cannabis crops and the Federal Drug Administration’s (FDA) threatened crackdown on medical cannabis claims, painted an ominous picture for the cannabis industry throughout the United States (although some of us were more optimistic).

It’s been over four months since Sessions rescinded the Cole Memo and although he’s rattled his saber on some occasions, the dreaded crackdown has not occurred. For that we may have Russia to thank. Sessions’ self-recusal from the DOJ’s investigation into Russian government meddling in the presidential election has made him persona non grata in the Trump administration — thereby placing his priorities at the very bottom of President’s Trump list.

Rather than a return to federal enforcement actions, we’ve begun to see quite a few positive developments as of late. Last week, President Trump told U.S. Senator Cory Gardner (R-CO) that he was committed to supporting a legislative solution to the tension between state’s that regulate cannabis activities and federal law (which we covered here). This could be a very important development, and let’s hope that this is one issue in which the President doesn’t change his mind.

Besides the commitment that the President made to Senator Gardner, there have been a number of other developments that have given cannabis businesses a reason to be optimistic:

  • The FDA just released a report that a CBD based drug has shown to have positive effect on those that suffer from seizures and epilepsy. This is a big blow to the federal government’s position that the cannabis plant has no medical value.
  • U.S. Senator Mitch McConnell (R-KY) recently introduced a bill in the Senate that would authorize hemp as an agricultural product. Any progress in the federal legalization of hemp will eventually also benefit marijuana legalization.
  • Senators Orrin Hatch (R-UT) and Kamala Harris (D-CA) sent a letter to the DOJ and the Drug Enforcement Agency, calling on them to increase the pace of medical research in cannabis. There have been approximately twenty-five applications submitted to the DEA to produce federally approved research-grade marijuana but none of them have been approved.
  • U.S. Representative  Dana Rohrabacher (R-CA) recently issued a statement that he plans on introducing a stand-alone bill that will respect a state’s right to regulate cannabis and would make the Rohrabacher-Bluemenaur Amendment permanent.

Taken as a whole, these are all encouraging developments– especially considering their bipartisan support. However, this is not the time to rest on our precarious laurels. The November mid-term elections will be on us before we know it and it will be up to all of us to elect officials that are against the government’s draconian war on cannabis. We can’t leave this up to Russia to decide for us, after all.