Photo of Habib Bentaleb

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

San Francisco cannabis lawyersA couple of months ago we covered San Francisco in our Cannabis Countdown series. All up and down the state of California, local jurisdictions are constantly updating or amending their cannabis regulations and San Francisco is no different. There was also an enormous update on the state level as California’s Bureau of Cannabis Control, along with the state’s other cannabis licensing agencies (the Departments of Public Health and Food and Agriculture), just released their emergency regulations.

There’s a lot to digest in these 278 pages of regulations, but don’t fret as you know you can count on the Canna Law Blog to update you regularly on here with posts from our San Francisco and Los Angeles lawyers  and with our upcoming Los Angeles Cannabis Investment Forum on November 30 (go here to get your tickets for that before it sells out) and with a new webinar specifically on the new rules coming soon.

What hasn’t changed since California promulgated their rules (now withdrawn) under the Medical Cannabis Regulation and Safety Act is that local jurisdictions still control the types of cannabis licenses they are willing to permit inside their boundaries. Local jurisdictions still rule the roost and staying atop of the jurisdiction in which you want to operate your cannabis business is paramount. Just last week as I was meeting with clients at the MJBizCon conference in Las Vegas, the San Francisco Board of Supervisors (“Board”) released a draft of its new cannabis ordinance, which has significant implications for cannabis businesses looking to operate in San Francisco. The Board proposed amendments to San Francisco’s Planning Code (you can find them here) and the Administrative, Business and Tax Regulations, Health, and Police codes (here you go).

And if those are not enough to keep you busy, if you operate a cannabis cultivation, manufacturing, or distribution business in San Francisco you have until November 30th to register your business with San Francisco’s Office of Cannabis. In other words, if your cannabis business is eligible, you need to STOP researching Thanksgiving recipes and REGISTER with the Office of Cannabis here. To say that the phone lines in our San Francisco office have been ringing off the hook since the announcement by the Office of Cannabis would be both a cliché and the truth. Our cannabis lawyers have been representing companies in California, Washington, and Oregon since 2010 and we cannot remember any governmental body providing for such a tight deadline.

The below are some of the more important changes to the Board’s proposed amendments:

  • It creates an equity program that grants priority permit processing for equity applicants and defines an equity applicant as someone who a) lived in San Francisco for at least five years during the time period of 1971-2009; b) lived in a census tract where at least seventeen percent of the households had incomes at or below the federal poverty level; and c) at the time of application, has assets  (excluding non-liquid assets and retirement accounts) that do not exceed asset limits established by the Director (of the Office of Cannabis). For the entire list of criteria that defines an equity applicant look to Section 1604(b).
  • It establishes priority processing for equity incubators. An equity incubator is an applicant that does not qualify as an equity applicant, but that submits with its cannabis business permit application a cannabis equity incubator agreement in which it commits to comply with certain operating requirements (see section 1604(c)) during its first three years in operation as a cannabis business.
  • It creates a process to issue temporary cannabis business permits for all permit categories other than storefront retailers.
  • It allows storefront retailers to operate a compassion program that provides medicinal cannabis and/or medicinal cannabis products at no or nominal cost to low-income individuals qualified under California Health and Safety Code sections 11362.7 et seq. to use medicinal cannabis.
  • It allows for onsite cannabis consumption at dispensaries and microbusinesses so long as they have a valid cannabis consumption permit.
  • It prohibits delivery of cannabis products by businesses outside San Francisco. Only retailers and delivery-only retailers with a license from the Office of Cannabis can deliver cannabis within the city limits of San Francisco.
  • And of utmost importance, it provides that only those who fit into one of the following categories  can receive a permit from the Office of Cannabis in 2018:
    1. You are an equity applicant or an equity incubator.
    2. You possess a valid permit to operate a medical cannabis dispensary.
    3. You were issued a temporary permit.
    4. You can show you operate in compliance the Compassionate Use Act of 1996 and you were forced to discontinue operations as a result of federal prosecution or the threat of federal prosecution.
    5. You applied for a medical cannabis dispensary permit prior to September 26, 2017, that required referral to and approval by the planning commission.
    6. You registered with the Office of Cannabis as a pre-existing non-conforming operator, as set forth in subsection (k) of section 1605.

We previously covered the importance of reaching out to your local legislator when it comes to the implementation of cannabis policy and that holds true whether you live in a small town or a big international city like San Francisco. If you have issues with the Board’s amendments now is the time to speak up as they are expected to vote on them on November 28th, so call your district supervisor now!

California cannabis bankingThe lack of reliable banking services has always been a problem for the cannabis industry. We’ve seen the dearth of banking options pose problems for fundraisers, advocacy groups, and state-chartered financial institutions.

Though 29 states and the District of Columbia have broadly legalized medical use of cannabis (eight of those states have also legalized adult-use), cannabis is still illegal under federal law and most financial institutions refuse to bank cannabis businesses. It is against this backdrop that  California State Treasurer John Chiang last week released a report (“Report”) outlining California’s approach to this problem. The Treasurer estimates California adult-use cannabis sales will exceed $7 billion by 2020 and will bring in approximately $1 billion a year in state tax revenues. The Report affirms that the status quo on cannabis banking is untenable for an economy the size of California’s.

The Report lists the following four areas as those on which the State of California must act:

1) Cash Handling for Collection of Taxes and Fees. The state cannot force financial institutions to bank cannabis businesses but it can implement strategies for an easier, safer, and more efficient way for cannabis businesses to remit their taxes and fees. In furtherance of this goal, the Report suggested the following:

  • State taxing agencies, the Treasurer’s office, and financial institutions should contract with an armored courier service to collect state tax and licensing payments.
  • The State of California should install smart safes and kiosks at government agencies and cannabis businesses.
  • California cannabis businesses should be allowed to use money services businesses for smaller tax payments.
  • California cannabis businesses should be allowed to use third-party payment services to make electronic payments (think PayPal or Venmo).

2) Expanding Cannabis Industry Access to Banking Services Under Current Law. California is not the first state to legalize cannabis for adult-use and the Report looked at Washington and Colorado where some credit unions are openly banking cannabis businesses. These Washington and Colorado credit unions are following guidelines promulgated by the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). The FinCEN guidance on cannabis provided information for financial institutions to bank cannabis businesses while still complying with the Bank Secrecy Act and the USA Patriot Act. The Report suggests creating an online portal to assist financial institutions to comply with FinCEN rules. The online portal would gather information from all 11 California state agencies with cannabis regulation or data collection responsibilities.

3) A State-Backed Financial Institution. The Report also looked at the feasibility of creating a state-owned or state-backed financial institution with either a broad mission to expand banking services to underserved groups or to narrowly focus on the cannabis industry. The prospects of a state-owned bank look dim because of the inability to obtain deposit insurance, the possibility of federal asset forfeiture, and the high (pun not intended) start-up costs. The Report also looked into the feasibility of a “bankers’ bank”: a private institution whose customers are other banks. Under this model, the bankers’ bank would help financial institutions comply with the Cole Memorandum and FinCEN guidelines. The biggest roadblock to the bankers’ bank is that it would do little to nothing to reduce financial institution fear of federal enforcement.

4) Full Access to Banking Services: The Federal Solution. In its final option, the Report relies on lobbying with the goal of bringing the federal government to its senses. One piece of legislation worth calling your representative about is the Secure and Fair Enforcement Banking Act (“SAFE Banking Act”), which aims to provide a safe harbor for banks that service cannabis businesses. Another focus is achieving the holy grail of the cannabis industry: removing cannabis from the federal government’s list of Schedule 1 controlled substances.

The report does a good job highlighting the unnecessary difficulties imposed on cannabis businesses by the federal government’s listing cannabis as Schedule 1 drug. As more states continue to legalize, regulate, and receive tax revenue from cannabis businesses there is reason for optimism. With staunch conservatives such as Utah Senator Orrin Hatch starting to see the light, it is fair to say that the federal legalization option is increasingly becoming less far-fetched – especially if we continue seeing the sort of election results we saw last Tuesday.

Now is not the time to rest on our precarious laurels. We all need to keep up the intensity, educate our local legislators, and most importantly, vote!

California Cannabis HaywardCalifornia 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 waiting to see what to do with cannabis, and who is embracing California’s change to legalize marijuana — permits, regulations, taxes and all. For each city and county, we’ll discuss its location, history with cannabis, current law, and proposed law, all 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 Alameda County, and before that 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 City of Hayward.

Welcome to the California Cannabis Countdown.

LocationHayward is a city in Alameda County that borders the East Bay cities of San Leandro, Fremont, and Pleasanton. Though Hayward doesn’t have the worldwide recognition of San Francisco or Oakland, it is an affordable city near the water with a strong manufacturing base.

History with Cannabis and Current Cannabis Laws. Right now you might be asking yourself: Hayward? Sure Hayward at first might not seem like a jurisdiction in which to locate your California cannabis business, but in the other states in which we have cannabis lawyers (Oregon and Washington), we long ago learned that the most glamorous cities are not necessarily the most profitable ones.

Historically, Hayward’s stance towards cannabis probably aligns closer with U.S. Attorney General Jeff Sessions than with most Californians. Hayward’s unfriendly approach to cannabis — absolute prohibition through an exclusionary zoning ordinance — was even starker when compared to the other progressive cities in the East Bay (Oakland, Berkeley, and Emeryville). Hayward’s slow march towards progress began in November of 2016 when approximately 60 percent of Hayward voters supported Measure EE and 56 percent voted for the Adult Use of Marijuana (a/k/a Prop 64). Measure EE set up a tax structure allowing the city of Hayward to tax cannabis businesses up to fifteen percent of their gross sales. The Measure specified that the tax could apply to medical and adult-use cannabis businesses and cover seed to sale license types (cultivation, manufacturing, distribution, and retail). Let’s give credit when it’s due as Hayward’s city council took notice of their residents’ wishes and just recently proposed and voted on a new cannabis ordinance.

New Cannabis Laws: On September 14, 2017, the Planning Commission held a hearing to discuss regulations for cannabis business and on October 17, Hayward’s City Council introduced an ordinance amending their municipal code. The proposed ordinance removed Hayward from the dark ages of complete prohibition. On October 30th, the City Council approved a final version of their cannabis ordinance. Here’s a list of the some of the highlights (and some lowlights) of Hayward’s cannabis ordinance:

  • Allows medicinal and adult-use commercial cannabis businesses.
  • Will permit seed to sale license types, including laboratories. Commercial cannabis cultivation operations under 5,000 square feet will only need an administrative use permit, bigger operators will need to obtain a conditional use permit.
  • Outdoor commercial cannabis cultivation is prohibited.
  • Volatile manufacturing is prohibited.
  • Caps the number of retail dispensaries to no more than three.
  • Onsite consumption is prohibited although an exception could be granted for qualified medical patients.
  • Temporary special events that involve onsite cannabis sales and consumption may be allowed if the applicant receives a special event permit.
  • Multiple cannabis businesses can be permitted per site so long as the businesses are located on separate and distinct premises.
  • Creates an ancillary option for retail sales. The retail sale of cannabis and cannabis products is allowed only as a component of a microbusiness operation. The operator must hold a microbusiness (Type 12) license issued by the state Bureau of Cannabis Control. The cumulative floor area of the retail activity shall not exceed 10 percent of the first-floor area of the industrial building and all cannabis and cannabis products for sale must have been cultivated, produced and manufactured on-site.
  • All individuals that participate in the production of edible cannabis products must be state certified food handlers.
  • Security cameras will have to allow for remote access to be provided to the Hayward Police Department.
  • All cannabis businesses shall be subject to a 600-foot minimum setback from schools, day care centers, youth centers, and open space areas or designated parks used towards children’s activities. The setback for public parks and open spaces may be reduced by the Planning Commission.
  • Applications for a cannabis business permit will be evaluated by the City Manager.

As a whole, this is a pretty substantial first step by Hayward to regulate the cannabis industry. Sure, we’d prefer if there weren’t a cap on dispensaries but the city is showing some creativity by creating an ancillary sales option. This modified microbusiness model could be an attractive option for many California cannabis business owners. We’ll still have to wait to see how Hayward implements this ordinance, but it’s safe to say that you won’t find Hayward on this list anytime soon. Well done Hayward, well done.

California cannabis water requirements This past week the California Bureau of Cannabis Control (“BCC”), along with a number of other state regulatory agencies, held three cannabis business licensing workshops – the last one in Sacramento. These licensing workshops received a lot of attention but they weren’t as informative or as consequential to the California cannabis industry as the staff report and Cannabis Cultivation Policy (“Policy”) released by the State Water Resources Control Board (“Board”) on October 17, 2017 — the same day as the Sacramento workshop. For many, this might be the first you’re hearing of the Board’s report or perhaps of the Board’s involvement in cannabis regulation at all. If you need a little refresher, you’ve come to the right place.

After enactment of the Medical Cannabis Regulation and Safety Act (“MCRSA”), Governor Jerry Brown signed Senate Bill 837 (“SB 837”) into law. SB 837 added a number of environmental protection provisions to the MCRSA and tasked the Board with coming up with guidelines to protect the environment. When the Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA”) was enacted this past June, the Board’s role in regulating the cannabis industry was solidified. MAUCRSA specifically states that the California Department of Food and Agriculture shall include in any license for cultivation all of the following:

“Conditions requested by the Department of Fish and Wildlife and the State Water Resources Control Board to (A) ensure that individual and cumulative effects of water diversion and discharge associated with cultivation do not affect the instream flows needed for fish spawning, migration, and rearing, and the flows needed to maintain natural flow variability; (B) ensure that cultivation does not negatively impact springs, riparian habitat, wetlands, or aquatic habitat; and (C) otherwise protect fish, wildlife, fish and wildlife habitat, and water quality. The conditions shall include, but not be limited to, the principles, guidelines, and requirements established pursuant to Section 13149 of the Water Code (emphasis added).”

In its report, the Board divided California’s 163,696 square miles into fourteen regions — nine of which are identified as priority regions because they support salmon. The nine priority regions are: Klamath, Upper Sacramento, North Coast, Middle Sacramento, Southern Sacramento, North Central Coast, South Central Coast, San Joaquin, and South Coast. The Board is particularly concerned with the discharge of pesticides, fertilizers, fuels, and trash into California’s waters. The unfortunate truth is that not all cannabis cultivators are good stewards of our precious environment. Furthermore, when combined with years of drought, the practice of water diversion threatens water quality and aquatic habitat. The Board then listed the following twelve items of concern when addressing waste discharges:

  1. Site development and maintenance, erosion control, and drainage features;
  2. Stream crossing installation and maintenance;
  3. Riparian and wetland protection and management;
  4. Soil disposal;
  5. Water storage and use;
  6. Irrigation runoff;
  7. Fertilizers and soil;
  8. Pesticides and herbicides;
  9. Petroleum products and other chemicals;
  10. Cannabis cultivation waste;
  11. Refuse and human waste; and
  12. Cleanup, restoration, and mitigation

The Board’s Policy provides for a statewide-tiered approach for permitting waste discharges from cannabis cultivation, depending on whether the cultivation is for personal use, indoor commercial cultivation, or outdoor commercial cultivation. The criteria for outdoor commercial cannabis cultivators will vary depending on the size of the disturbed area, but they’ll mainly focus on the slope of the disturbed area and the proximity to a surface water body. The Policy also details the different ways for cultivators to register and establish their water rights.

The Policy comes in at a hefty eighty-nine pages and contains too many regulations for one blog post to cover it all. What’s clear is that the Board takes its role as an environmental steward very seriously. We’ll have to wait and see whether cannabis cultivators in California will be able to satisfy the Board’s proposed regulations. A cultivator’s state license will depend on it.

California cannabis lawyers

Our California cannabis lawyers are constantly asked how big sales and tax revenues will be in California once adult use cannabis becomes legal there. With recent reports of increased sales in Colorado and Nevada, everyone is expecting California – with its population of nearly 40 million people – to dwarf the sales of other adult use cannabis states. Many see California sales exceeding Colorado and Washington sales (together!) by at least ten times. To say our law firm is bullish on California would be an understatement; we literally cannot find good lawyers fast enough for our two California offices (Los Angeles and San Francisco).

When Californians voted for the Adult Use of Marijuana Act (a/k/a AUMA or Prop 64), you could smell the enthusiasm. Our California offices were deluged with a flood of investors looking to invest in California cannabis businesses. Then Governor Brown and the California legislature removed Prop 64’s in-state residency requirement with the enactment of the Medicinal and Adult-Use Cannabis Regulation and Safety Act (a/k/a MAUCRSA or SB 94) this past June. With residency requirements removed, my firm saw a significant increase in interest from clients outside California seeking to obtain cannabis business licenses in the Golden State.

Unfortunately, local legislators in California’s cities and counties have not kept pace with the enthusiasm on the business side. Prior to SB 94, the legal cannabis landscape consisted of California jurisdictions focused on their medical cannabis ordinances in step with the Medical Cannabis Regulation and Safety Act of 2015(MCRSA). The MCRSA was California’s first attempt at establishing a statewide regulatory and licensing regime. The MCRSA also allowed medical cannabis businesses to operate as for-profit businesses starting in 2018.

With most local jurisdictions playing catch-up with the MCRSA, it’s unlikely Californians will be able to purchase recreational cannabis on January 01, 2018. That’s because most California cities and counties are waiting on the state’s main cannabis regulatory agencies – the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health – to publish their emergency regulations before they enact their own adult use cannabis ordinances. The emergency regulations should be released in mid to late November and the Bureau of Cannabis Control has stated that cannabis businesses will be able to apply for temporary permits online in December.

Though it might take a little longer than expected before adult use cannabis sales in California become commonplace, we are seeing local regulators moving in the right direction. In our Cannabis Countdown series, we keep our readers apprised of cannabis ordinance developments on the local level and the below is an updated snapshot of what’s going on across the state regarding adult-use commercial cannabis activities:

Los Angeles: On March 07, 2017, Los Angeles residents came out in full force and voted for Proposition M, a much-needed effort at clearing up Los Angeles’s previously confusing, complicated, and unfriendly position towards medical cannabis businesses. On June 8th of this year, the Los Angeles City Council released draft requirements for commercial cannabis activities – which we covered here. After the release of these draft requirements, there was a 60-day comment period and on September 22nd, the City Council revised the draft requirements – which we covered extensively here. On September 25th the City Council Rules Committee requested the Los Angeles City Attorney prepare and present a draft ordinance addressing the changes made in the revised draft regulations. Though Los Angeles will authorize seed to sale license types (indoor cultivation, non-volatile and volatile manufacturing, distribution, and retail) it’s unlikely it will have an adult use cannabis permitting process in place by the start of 2018.

San Francisco: The city of San Francisco (where I am located) proposed draft cannabis legislation on September 26th of this year. The proposed legislation requires creating an equity program, authorizes the issuance of temporary local licenses for medical cannabis businesses, and will have seed to sale license types (including the microbusiness license). It also allows for medical and adult use cannabis licenses, but adult use licenses won’t be issued until the equity program is in place. The ordinance does not cap the number of permits to be issued citywide, nor does it limit the number of licenses a person can hold – except that testing licensees cannot hold other cannabis licenses. However at a recent stakeholder meeting I attended, it was discussed that the Board of Supervisors (BOS) may revisit the issue of licensing caps (at the individual applicant and citywide level). It’s paramount that cannabis supporters stay politically active and fight complacency — don’t let what happened in San Luis Obispo happen in your city. San Francisco’s Office of Cannabis is to provide the BOS with an equity report, a medicinal access report, and a proposed fee schedule by November 1st of this year. Much like Los Angeles, San Francisco has proposed a cannabis-friendly ordinance that likely will not be ready for 2018.

Humboldt County: As part of the famed Emerald Triangle, Humboldt County is a cannabis business-friendly jurisdiction. On September 7th, Humboldt County’s Planning and Building Department released a draft cannabis ordinance that provides for the following:

  • Licenses all seed to sale commercial activities (including non-volatile and volatile manufacturing);
  • Allows farm-based retail sales, subject to receiving a retailer’s license from the state (we’ll have to see what the Bureau of Cannabis Control has to say about that);
  • Authorizes temporary special events for cannabis sales and consumption;
  • Allows on-site consumption for retailers and microbusinesses (for persons 21 years of age and older); and
  • Allows for cannabis tours and cannabis farm stays.

This proposed ordinance cements Humboldt’s reputation as a place that thinks outside the box when it comes to attracting cannabis businesses. Humboldt’s proposed ordinance was up for review and public comment on October 18 and we expect its enactment by early December. We are not sure whether Humboldt will allow current medical cannabis businesses to convert over to adult use and for-profit enterprises before January 01, 2018.

Though some of California’s biggest population centers will take their time before enacting adult use cannabis ordinances, we envision some of the more sparsely populated (and tax-starved) California jurisdictions will be the first to move into the adult use cannabis marketplace.

We will be sure to keep you posted on new developments in our Cannabis Countdown series.

California cannabis lawyersCalifornia’s Bureau of Cannabis Control (the “BCC”) held public licensing workshops in three cities in California last week. If you didn’t get a chance to make it, don’t worry. We did and we’ve got you covered.

At the Los Angeles event, hundreds of people showed up to the point where most did not even get inside the building.The workshop focused on licensing information and resources available for people planning on applying for California state cannabis licenses. The BCC staff passed out flyers with the information required for temporary license applications. Temporary licenses will be effective starting January 1, 2018, and will allow businesses to engage in commercial cannabis activity for a period of 120 days.

Local jurisdiction authorization is still paramount to receiving a temporary license. If your business has not yet received this, it will delay your ability to receive a state temporary license. A license or permit issued by the local jurisdiction will be sufficient to show the applicant is allowed to conduct commercial cannabis activity at the location.

Other information required are names of the applicant (either individual or entity); license type; license designation; contact information; names of the owners; physical address and authorization to use the location for commercial cannabis activity; and a premises diagram showing the layout of the proposed location.

The last of the public licensing workshops was held in Sacramento this past Tuesday before a packed house at the Convention Center. Representatives from all of the state’s cannabis licensing agencies – California Department of Public Health (“CDPH”), California Department of Food and Agriculture (“CDFA”), and the BCC – were in attendance to answer the public’s questions. There were also representatives from the following departments:

  • California Department of Tax and Fee Administration;
  • California Department of Fish and Wildlife;
  • California Department of Insurance;
  • California Secretary of State;
  • California Employment Development Department;
  • California Department of Industrial Relations; and
  • Sacramento’s Office of Cannabis Policy and Enforcement.

The scene in the Sacramento’s Convention Center can be described as polite chaos as the public made its way through the tables staffed by these departments. Cannabis businesses, advisors, and investors were all hoping to gather as much information and clarification as possible in what is still an evolving California cannabis regulatory landscape. The lack of clarity is a source of consternation for many cannabis businesses worried about their business model going forward and I highly recommend California cannabis business owners (and all interested stakeholders) review the proposed medical regulations released in April of this year; you can find the BCC’s here, the CDPH’s here and the CDFA’s here. I then recommend you review how each department summarized and responded to public comments when the proposed medical regulations were withdrawn. You can find the BCC’s response here and here (the latter on testing facilities), the CDPH’s here, and the CDFA’s here. Get a pot of coffee brewing and delve into those weeds (too many puns I know but I just couldn’t help myself).

Lori Ajax, the Chief of the BBC, did speak briefly and reiterated that the state will issue emergency regulations in mid to late November and that the state’s licensing agencies will accept temporary license applications online in early December. Ms. Ajax was not able to say what the cost of the temporary permit would be (the fees will be released with the emergency regulations) but did stress that the temporary permit fee will be separate from the annual license application fee.

When the emergency regulations are released in November, our California cannabis attorneys expect a flurry of activity as cannabis businesses seek to gain temporary licensure and an early foothold in what will be the new California cannabis landscape. However, current cannabis businesses and new entrants should take this time to review their business model and entity structure. We’ll be sure to stay on top of this for you and we’ll continue with our popular California cannabis webinar series when the emergency regulations are released.

Stay tuned!

California Cannabis hearings
Attend your local california cannabis hearings

One of the first questions clients usually ask our California cannabis lawyers is “where can I operate or expand my cannabis business?” That is because even though Californians voted for the Adult Use of Marijuana Act (a/k/a AUMA or Prop 64) California counties and cities are free to enact their own restrictions on cannabis businesses operating within their jurisdiction.

If you’ve been reading our California Cannabis Countdown series you know that to get a California State cannabis license you first need a license from your local city or county. Further complicating things is that prior to enactment of the Medical Cannabis Regulation and Safety Act of 2015 (MCRSA), many cannabis businesses were operating in an unregulated gray market or with tacit approval from their local government because few jurisdictions had their own medical cannabis ordinances and permitting processes in place. When the MCRSA and AUMA passed, most local jurisdictions created their own licensing processes so as to be able to receive a portion of California’s cannabis licensing fees and taxes.

Last week I spoke to the Marin County Bar Association on cannabis ordinances in Marin County and its municipalities. Except for Fairfax, the rest of Marin is generally not friendly towards medical cannabis. If you’re asking why I’m not talking about adult-use cannabis it’s because you’ve got to crawl before you can walk and Marin’s still figuring out how to crawl when it comes to cannabis. Both Marin County and its cities are still contemplating whether to allow medical cannabis; adult use cannabis is most likely quite some time away.

When a California city or county is trying to decide whether to allow cannabis businesses within their jurisdiction, the first thing they do is hold public hearings, with notice of the hearing made online or in the local paper. If your local government has a relevant listserv, I recommend you sign up as that’s the easiest way to stay informed. Our California cannabis attorneys regularly attend public hearings to advocate for our clients and for the cannabis industry and here is our top five list of what you should do if you would like to see your jurisdiction adopt reasonable/favorable cannabis regulations:

  1. Show up. You know the old saying about how 80% of life is showing up? Well, if you want your local jurisdiction to adopt reasonable cannabis regulations you need to show up to these hearings and voice your support – in large numbers.
  2. Be reasonable. Talk to your neighbors and local businesses. Maybe you’ll find out that a dispensary will be heavily opposed but the community is open to manufacturing, testing, and deliveries.
  3. Know your facts. Your local councilman or supervisor probably has a full-time job; most are volunteers with family obligations and work deadlines. They don’t have time to delve into the weeds (pun intended) of the cannabis industry. They want to be informed so let them know what they can expect in tax revenue. How about crime statistics in similar localities? What percentage of local residents voted for Prop 64? They probably don’t have this information so provide it to them. Help them so they can help you.
  4. Parking and traffic. Besides parking garage owners, no one likes a shortage of public parking. If you’re hoping your jurisdiction adopts a dispensary ordinance make sure you address parking and traffic.
  5. SHOW UP! I mention it twice because it’s that important. Time and time again, we’ve seen local legislators get cold feet because naysayers show up to public hearings in full force while proponents stay at home. You need to be there to balance the scales.

The California state agencies that will issue licenses (Bureau of Cannabis Control, Department of Food and Agriculture, and Department of Public Health) can only do so if your local jurisdiction allows it. Don’t take for granted that your local legislators will allow cannabis businesses in your town. Activism has been a hallmark of the cannabis industry for a long time and if you want to see cannabis businesses (either medical or adult-use) in your jurisdiction of choice, it could very well be up to you to help achieve that.

Alameda cannabis lawyersCalifornia 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 waiting to see what to with cannabis, and who is embracing California’s change to legalize marijuana — permits, regulations, taxes and all. 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 Oakland and before that San 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 Alameda County.

Welcome to the California Cannabis Countdown.

Location.  Alameda County is the 7th most populous county in the state of California. Its county seat is in Oakland and it occupies much of the East Bay region. It’s home to the Alameda County Fair and the Alameda County Fairgrounds, which can boast to being the home of the oldest one-mile horse racing track in America. Hope that tidbit comes in handy on trivia night.

History with Cannabis and Current Cannabis Laws. Back in 2005, Alameda County (this post is addressing only Alameda County and not the City of Alameda) began regulating cannabis by passing a medical cannabis dispensary ordinance. Though we’re always happy to see cities and counties embrace cannabis businesses with sensible and reasonable regulations, Alameda’s first foray should be described as a very timid one. Alameda’s ordinance only addressed medical cannabis dispensaries and it capped the number of dispensary licenses at three and it also limited the amount of cannabis a dispensary could keep on its premises.

With friendlier regulations in Oakland, Berkeley, Richmond, and Emeryville, this first ordinance put Alameda at a competitive disadvantage with potential cannabis businesses when compared to those cities. With the passage of the Medical Cannabis Regulation Safety Act (MCRSA), Alameda County (along with a number of other California jurisdictions) decided it was time to amend their cannabis ordinance. In June of 2016, the Alameda County Community Development Agency and the Castro Valley Municipal Advisory Council held a meeting to begin the process of updating Alameda’s cannabis ordinance. If you’ve ever followed a cannabis ordinance as it winds its way through your local jurisdiction you are well aware that after one meeting comes many others – supervisor meetings, planning commission meetings, citizen advisory committee meetings, and interdepartmental working group meetings, just to name a few. Like Gremlins, the meetings just continue to multiply. Let me not be too harsh on Alameda because slow progress is better than no progress and definitely better than these alternatives.

Proposed Cannabis Laws: On August 1, 2017, the Alameda County Board of Supervisors conducted the first reading of its proposed amendments to their cannabis ordinance and on September 12th of this year (we like to keep you up to date here on the Canna Law Blog) the Board held a second reading of their cannabis ordinance. Here’s a list of the some of the highlights of Alameda’s cannabis ordinance:

  • Increases the number of dispensaries allowed from three to five.
  • Allows delivery of medical cannabis from permitted dispensaries within the county and from outside jurisdictions from 9:00am to 9:00pm.
  • Allows the sale, distribution, and delivery of edibles.
  • Removes the 100-pound limit on the amount of cannabis that can be stored by a dispensary on its premises.
  • Implements a two-year pilot program authorizing medical cannabis cultivation. This pilot program will authorize up to six cultivation permits – up to two indoor cultivation operations and four mixed-light operations. Outdoor cultivation is prohibited.
  • Nurseries may be permitted where cultivation is permitted.
  • Cultivation sites will have to be at least one thousand feet from any pre-K to 12th grade school, licensed child or day care facility, public park or playground, drug or alcohol recovery facility or public recreation center.

Although the caps imposed on medical cannabis dispensaries and cultivators will limit the innovation, investment, and tax revenue generated by Alameda County cannabis businesses, this is still a step in the right direction and we should not let perfect be the enemy of the good. We’re also optimistic that Alameda County will continue on its path towards increased legalization – perhaps with fewer meetings next time.

California cannabis processors

Three of our California cannabis lawyers recently did a webinar on the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) and how it repealed the Medical Cannabis Regulation and Safety Act (“MCRSA”) while consolidating some of MCRSA’s provisions with the licensing provisions of the Adult Use of Marijuana Act (“AUMA”). If you missed the webinar don’t you worry, we’ve got you covered right here. During the webinar we received so many great questions from our attendees (close to 1,500 people signed up!), we decided to address them here on the Canna Law Blog. Last week we discussed the future and unknowns surrounding onsite consumption in California. This week we’re going to discuss California cannabis processors.

If you find yourself thinking you never read anything about about cannabis processors in the MAUCRSA, go ahead and give yourself a pat on the back because it does in fact nowhere mention processors, nor is there any mention of processors in the California assembly and senate bills that made up the MCRSA. Upon passage of the MCRSA, the California Department of Food and Agriculture (“CDFA”) held eight public workshops to solicit feedback from the public and interested stakeholders. After the workshops, the CDFA published a scoping report detailing some of their findings. When the CDFA released its proposed regulations for the medical cannabis cultivation program it also released a companion Initial Statement of Reasons (“ISOR”) and it is in the ISOR where we are first introduced to processors.

In the ISOR, the CDFA states “it was brought to the Department’s (that’s the CDFA) attention that some cultivators send untrimmed, uncured, or unpackaged cannabis to locations off-site for processing” and decided to add the processor as a new license type. Under the proposed regulations, a processor can also hold different types of cultivation licenses but would not be allowed to grow cannabis plants at the processing facility. The proposed annual license fee for processors was $2,790 – which was on the lower end for cultivation license type fees. The CDFA went on to define a processor in the proposed medical regulations as a cultivation site that conducts only trimming, drying, curing, grading or packaging of cannabis and non-manufactured cannabis products.

What caught many people’s attention is how CDFA classified pre-rolls as a type of non-manufactured cannabis product. Though consumer feedback on the quality of pre-rolls varies, there’s also a burgeoning marketplace for cannabis businesses that promote quality and brand themselves accordingly. The CDFA also envisioned an increased interest in processor licenses as they assumed approximately 20% of California’s cannabis production would be processed through California licensed cannabis processors. As you can imagine, our cannabis attorneys were getting a boatload of inquiries regarding this license type, but then California Governor Jerry Brown signed MAUCRSA into law and just like Keyser Söze, it was gone.

But is the processor license type gone for good here in California? Will those with cultivation licenses under MAUCRSA be allowed to conduct cannabis processing on their premises or will the CDFA bring back from the dead the processor as a separate license type in California? We’ll have to wait until the CDFA publishes its new proposed regulations in the fall under an emergency rule-making process so that the state will be able to issue cannabis licenses beginning on January 02, 2018. Since the processor license type was so short-lived, even if the CDFA does re-create it as a license type it will probably take some time for cities and counties to add processors to their licensing structure.

We’ll keep you posted on any new developments.

California cannabis events
California cannabis events. So far, so good.

In case you missed it, on June 27, 2017, California Governor Jerry Brown signed into law the Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA”). MAUCRSA repealed the Medical Cannabis Regulation and Safety Act (“MCRSA”) while consolidating some of the MCRSA’s provisions with the licensing provisions of the Adult Use of Marijuana Act (“AUMA”). Our firm just recently held a webinar on the major changes between the MCRSA and MAUCRSA and what California cannabis businesses can expect from California’s Bureau of Cannabis Control (be sure to check in regularly as we’ll be posting the webinar on our site in the next couple of days). During the webinar we addressed a whole host of questions but due to the number of attendees (nearly 1,500 of you signed up) and the volume of questions, we couldn’t get to all of them. Fret not though my friends, as over the coming days we’ll be answering many of your questions here on the Canna Law Blog. As a matter of fact, how about I start now and discuss a topic on which we received a lot of questions: onsite consumption at cannabis events (where such events have slowly started to fade because of robust state cannabis regulations–see here and here).

The AUMA granted local jurisdictions the authority to decide whether smoking, vaporizing, and ingesting cannabis would be allowed by a retailer or a microbusiness. Ultimately, the ability to provide a unique and personal experience via onsite consumption will enhance California cannabis retailers and microbusinesses abilities to differentiate themselves in the marketplace. Onsite consumption will also prove to be a big advantage for California cannabis businesses bordering Nevada, as state regulators there grapple with the issue of onsite consumption.

The MAUCRSA also built on the AUMA’s concept of onsite consumption by allowing for temporary event licenses for onsite cannabis sales and consumption at district agricultural association events and your local county fair–just when you thought churros couldn’t get any better! Does that sound too good to be true? Well that’s because I haven’t mentioned the following caveats:

  • Only a licensee can receive the temporary event license;
  • Your local jurisdiction has to authorize such events in the first place;
  • Access to the area where cannabis consumption is allowed is restricted to persons 21 years of age and older;
  • Cannabis consumption is not visible from any public place or nonage-restricted area; and
  • Sale or consumption of alcohol or tobacco is not allowed on the premises. Sorry, but no jamming out to Phish with a beer and a pre-roll in your future.

The MAUCRSA also states the activities at such events must be “otherwise consistent with regulations promulgated and adopted by the Bureau [of Cannabis Control] governing state temporary event licenses.” What are these regulations you ask? Unfortunately we won’t know until the Bureau releases them in the fall. Normally we’d look to the draft medical regulations the Bureau released this past April for guidance but those regulations didn’t cover onsite consumption and they only apply to MCRSA (and have been withdrawn because of MAUCRSA). What we do know is there’s a lot of interest in how the Bureau will interpret the definition of premises. Premises is currently defined in the MAUCRSA as follows:

The designated structure or structures and land specified in the application that is owned, leased, or otherwise held under the control of the applicant or licensee where the commercial cannabis activity will be or is conducted. The premises shall be a contiguous area and shall only be occupied by one licensee.

If the area “held under the control of the applicant and licensee” is separate and distinct from the rest of the fairground, will that constitute separate premises and satisfy the alcohol restriction? At most county fairs you’ll find a great selection of local wines and craft beers and that’s not going to be changing any time soon. However we foresee county fairs will not want to miss out on the revenue and foot traffic a well-cultivated list (pun definitely intended) of cannabis businesses can attract.

Will the Bureau propose reasonable regulations (perhaps restricting cannabis consumption to evening hours?) to allow county fairs to provide for reasonable consumption of alcohol and cannabis on county fairgrounds? Will the one licensee restriction apply to temporary events? That seems unlikely, but until the State of California releases its cannabis regulations we won’t know for certain. What we do know is that these temporary event licenses will be a great way for entrepreneurial cannabis businesses to market themselves – let’s just hope the Bureau issues business friendly and reasonable regulations.