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 Luis Obispo California cannabis
SLO is thinking through its options for cannabis.

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 marijuana 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 Redding, and before that the City of San Rafael, 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 City of San Luis Obispo (not the County). We’ll provide an update on what the County is up to next week.

Welcome to the California Cannabis Countdown.

LocationSan Luis Obispo (affectionately referred to as SLO) is a city in San Luis Obispo County and is home to California Polytechnic State University (well sort of, since Cal Poly’s campus sits just outside the City limits and is part of the County). SLO is located in California’s Central Coast at about the halfway point if you’re driving from San Francisco to Los Angeles. If you need to spend the night or make a pit stop, check out the quirky Madonna Inn.

History with Cannabis: San Luis Obispo currently prohibits all commercial and industrial cannabis business activities. The City, like a many number of other California jurisdictions, enacted its ban prior to January 01, 2018 (SLO enacted its cannabis prohibition ordinance in March of 2017). The City’s prohibition wasn’t meant to be permanent as nearly sixty-eight percent of SLO voters approved the Adult-Use of Marijuana Act (a/k/a Prop 64). Instead, the purpose of the City’s ban was to act as a temporary stopgap while the City sought community feedback for a long-term cannabis solution. This “prohibit while we study the issue dance” is currently playing out throughout California. Since its moratorium, the City held a number of hearings and workshops in order to engage the community so that it could begin to develop a cannabis regulatory structure. To that end the City’s Community Development Director (CDD) prepared a report for the City Council to discuss today, February 20th.

Proposed Cannabis Laws: The CDD report is the first step in enacting a cannabis ordinance. When drafting the report, the CDD used community feedback and cannabis regulations in other jurisdictions as guideposts. The goal of the report is to propose an ordinance that will regulate the cannabis marketplace and that is acceptable to the City Council and the community. Here are some of the report’s highlights:

  • It authorizes both medical and adult-use cannabis activities.
  • Authorizes up to three retail licenses.
  • Delivery is allowed.
  • Outdoor cultivation is prohibited.
  • There will be three types of indoor cultivation license types: Special Cultivator (up to 5,000 square feet), Small Cultivator (up to 10,000 square feet), and Nursery (up to 10,000 square feet).
  • Special and Small cultivators can include processing.
  • There will be a citywide cultivation cap of 70,000 square feet.
  • Only non-volatile cannabis manufacturing is allowed.
  • Distribution and testing are allowed.
  • Onsite consumption and cannabis events are prohibited.
  • Applications would be reviewed and ranked by a third party consultant (the City is still working on a criteria for ranking applications).
  • The CDD asked whether cannabis products with high concentrations of THC should be banned.
  • The CDD asked whether persons under the age of 21 (regardless of medical recommendation) should be prohibited from dispensaries.

The CDD report is by no means a finished product, as further direction from the City Council and input from the community can drastically alter (for better or worse) what the final cannabis regulation will look like for SLO. If all goes well, the City will hold another hearing in front of the Planning Commission on March 28 and potentially adopt a resolution on May 01. We’ll be sure to keep you posted.

marijuana event california
Like this, but with cannabis.

In order for a business to succeed, it has to create a connection with customers. This is especially true if the product sold is one that customers consume. Think about the importance of tasting rooms for wineries, or of tap rooms for breweries (especially craft brewers). These venues allow customers to connect with a product in a social setting, giving those businesses a valuable marketing platform.

When the California state legislature passed the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), it granted local jurisdictions authority to regulate on-site marijuana consumption for retailers and microbusinesses, and temporary cannabis events. The focus of this post is on temporary events, but first, a quick refresher on the microbusiness license type is in order. A microbusiness is a cannabis licensee that must engage in at least three of the following commercial cannabis activities:

  • Cultivation (up to 10,000 square feet);
  • Manufacturing (Type 6 only);
  • Distribution; or
  • Retail.

All three (or four) of the commercial cannabis activities need to take place on the same premises. If a microbusiness chooses to cultivate, manufacture, and conduct sales, it would give that business a great opportunity to directly connect with its customers and tell a story. This is even truer if the local jurisdiction allows for on-site consumption. (For additional information on the microbusiness license type, see my thoughts here for Leafly Magazine.)

Now, back to temporary cannabis events. The Bureau of Cannabis Control (BCC) is the agency in charge of regulating and issuing temporary cannabis event licenses. If done right, participating in a cannabis event is another great way to connect and build up your consumer base and brand. There are a number of regulations that cover what is allowed at temporary cannabis events. Here are just a couple of highlights:

  • A temporary cannabis event license can only be issued to a cannabis event organizer.
  • A cannabis event organizer licensee is not authorized or licensed to cultivate, distribute, manufacture, or retail cannabis or cannabis products without first obtaining the appropriate licenses or authorizations to engage in such commercial cannabis activities.
  • No temporary cannabis event license will be issued for more than 4 days. Temporary cannabis event licenses will not be issued separately for consecutive days for the same event.
  • An application for a temporary cannabis event license shall be submitted to the BCC no less than 60 days before the first day of the cannabis event.
  • Cannabis sales at the event can only be conducted by a licensed cannabis retailer or microbusiness license holder.
  • Cannabis goods sold on site must be transported to the site by a licensed cannabis distributor.
  • Cannabis consumption is allowed but access to the consumption area shall be restricted to persons 21 years of age or older.
  • All cannabis goods at a cannabis event shall be in compliance with the state’s testing, labeling, packaging, and track and trace requirements.
  • Sale or consumption of alcohol or tobacco shall not be allowed on the premises.

What I didn’t mention is where these cannabis special events can take place. Under MAUCRSA, cannabis special events can only take place at a county fair or district agricultural association event. Restricting cannabis events to these locales eliminates California’s largest cities from hosting them. State Assemblyman Bill Quirk is seeking to rectify this through Assembly Bill 2020 (AB 2020). This bill was introduced last week and its most important provision can be found in Section 26200 (a)(1)(e), which provides:

“This division does not prohibit the issuance of a state temporary event license to a licensee authorizing onsite cannabis sales to, and consumption by, persons 21 years of age or older at a county fair or fair event, district agricultural association event, or at another venue expressly approved by a local jurisdiction for the purpose of holding temporary events of this nature, provided that the activities, at a minimum, comply with the requirements of paragraphs (1) to (3), inclusive, of subdivision (g), that all participants are licensed under this division, and that the activities are otherwise consistent with regulations promulgated and adopted by the bureau governing state temporary event licenses. These temporary event licenses shall only be issued in local jurisdictions that authorize such events.”

The goal of AB 2020 is to give ALL local jurisdictions the flexibility to determine when, where, or if they want to hold a cannabis special event within their borders. One of the first supporters of AB 2020 is the city of Oakland, which has shown an interest in adding cannabis sales at its Art and Soul Festival. If Oakland is able to add cannabis to an already popular festival – which might prove difficult, since Art and Soul is an all ages event – other cities are sure to follow.

AB 2020 is eligible to be heard in committee next month. We will be sure to keep you posted on its progress.

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 San Rafael, and before that 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.

redding cannabis california
Will the sun rise on cannabis in Redding?

Today’s post is on the City of Redding.

Welcome to the California Cannabis Countdown.

LocationRedding is a City in Shasta County that lies along the Sacramento River (walk across it via the Sundial Bridge if you’re visiting). If you’re looking to gain some serious bar night trivia street cred, the city is named after Benjamin Bernard Redding, a Sacramento politician that purchased land for railroad companies quite some time ago.

History with Cannabis: Historically Redding has not been quick to embrace the commercial cannabis industry. The City allowed for medical cultivation for up to six plants as an accessory use to a private residence, but prohibited the operation of medical collectives or cooperatives. In December of 2106, the City Council passed a moratorium, keeping its cannabis bans in place as it contemplated the new regulatory landscape after the passage of the Adult Use Marijuana Act (AUMA). The City Council then held a number of public hearings in order to solicit public feedback on what its cannabis ordinance should look like if the City decided to regulate cannabis businesses. During this time of public hearings, the City’s cannabis moratorium was extended again in November of 2017. City staff have since published a proposed cannabis ordinance that the Planning Commission will review on February 13, 2018.

Proposed Cannabis Laws:  The proposed ordinance (“Ordinance”) is quite an impressive step for the City of Redding considering that an outright local ban has essentially been in place since the passage of the Compassionate Use Act of 1996. Under the Medicinal and Adult-Use Cannabis Regulation and Safety Act local jurisdictions get to decide what types of cannabis businesses they’re going to authorize and that includes whether only medical cannabis businesses will be allowed. In many instances, we see circumspect jurisdictions begin by regulating medical cannabis commercial activities while prohibiting adult-use. That’s not the case with Redding’s Ordinance as it proposes to regulate medical and adult-use cannabis businesses. Here are some other highlights:

  • The City Manager can issue up to ten retail licenses. A retailer that holds both a medical and adult-use license shall be considered as one cannabis business;
  • Outdoor cultivation is prohibited;
  • There will be no cap on the number of indoor cultivators, manufacturers, distributors (including storage-only and transport-only distributors), testing laboratories, or deliverers of cannabis;
  • Retailers and delivery-only retailers can only operate between 8:00am and 8:00pm;
  • Microbusinesses and cannabis events are prohibited;
  • Volatile manufacturing is allowed, except the use of butane is prohibited;
  • The City Council has yet to establish its application fee; and
  • An applicant will have to disclose their financial assets, investors, loans, financial interest holders, and any gifts they may have received for the cannabis business.

Redding’s Ordinance is quite thorough, but it’s extremely important to note that it hasn’t passed yet. We’ve seen promising ordinances fall in the face of a small but vocal opposition before. If all goes well at the Planning Commission review on February 13, the Ordinance will be presented to the City Council on March 6, 2018. As someone who’s attended countless public hearings, I can’t stress enough the importance of showing up, so if you want to see Redding put an end to its cannabis prohibitionist streak, mark February 13th and March 6th on your calendar.

california marijuana legislation
Quite a bit, in California.

Ever since Californians voted in favor of the Adult-Use of Marijuana Act (a/k/a Prop 64), everyone has been looking to see how the regulated cannabis industry will develop in California. Last April, California’s state cannabis regulatory agencies (the Bureau of Cannabis Control, Department of Food and Agriculture, and Department of Public Health) released their medical regulations. Those regulations, issued under the Medical Cannabis Regulation and Safety Act (MCRSA), were in place for a little over two months before they were withdrawn when the state legislature passed the Medicinal and Adult-Use Cannabis Regulation Safety Act (MAUCRSA) in June of 2017. In November, California released its emergency regulations under MAUCRSA, which set out the rules for cannabis cultivators, manufacturers, distributors, laboratories, and retailers under the same regulatory regime.

Finally, on January 1st, 2018, California opened up its market to commercial cannabis businesses. So where does that leave us today? Last week I attended a meeting for members of the California Cannabis Industry Association in Sacramento where a lot of time was focused discussing the legislative landscape and priorities for California in 2018. There are a number of cannabis bills on the legislative agenda in 2018. Here are four to keep your eye on:

  • Assembly Bill 1578: Introduced by Assemblyman Reginald Jones-Sawyer, this bill would prohibit a state or local agency from taking certain actions without a federal agent obtaining a court order signed by a judge and presenting that order to the state or local agency. The controlled actions include: using agency money, facilities, property, equipment, or personnel to assist a federal agency to investigate, detain, detect, report, obtain information, or arrest a person for commercial or noncommercial cannabis activity that is authorized or allowed under state and local law; transferring an individual to federal law enforcement; detaining an individual at the request of federal law enforcement or federal authorities for cannabis-related activity that is legal under state and local law, etc. Basically, this bill is a way of telling the federal government to mind its own business.
  • Assembly Bill 1793: Introduced by Assemblyman Rob Bonta, this bill would state the intent of the Legislature to enact legislation to allow automatic expungement or reduction of a prior cannabis conviction. The rationale here is that a cannabis conviction should no longer be a scarlett letter, and should not preclude affected individuals from full participation in society.
  • Assembly Bill 1863: Another bill introduced by Assemblyman Jones-Sawyer, this bill attempts to alleviate the unfair and unjust tax burden placed on cannabis businesses by the Internal Revenue Service. This bill would allow for the deduction of business expenses for a cannabis trade or business under California’s Personal Income Tax Law.
  • Senate Bill 930: Introduced by State Senator Robert Hertzberg, this bill would address one of the biggest issues facing the cannabis industry: banking. The bill would state that it is California’s intent to enact legislation to create a state-chartered bank to service cannabis businesses.

When considering the evolving California regulatory scheme, it is important to note that aside from any pending legislation, the emergency administrative regulations currently in place are temporary. The state will have to issue permanent cannabis regulations this year, which will include a 45-day public comment period. On this point, we have been informed that the state plans on holding a number of forums throughout the year to garner public input.

If you have concerns about California cannabis regulation, whether it’s the cultivation acreage cap, the definition an “owner” of a cannabis licensee, or perhaps the disclosure requirements for financial interest holders, there is still time to contact your legislators and appropriate cannabis agencies. Now is not the time to rest: this year will be pivotal in the California cannabis story, and, by extension, in the cannabis industry throughout the United States.

As most everyone now knows California’s statewide licensing and regulatory regime for medical and adult-use cannabis businesses took effect on January 1st of this year. However what readers of our Canna Law Blog know is that every jurisdiction is free to decide whether to regulate or prohibit cannabis businesses within their border. It’s the state’s deference to cities and counties that make our California Cannabis Countdown series so popular. Not only are local jurisdictions regulating what types of cannabis businesses they’ll allow, but also WHO is eligible for a cannabis license.

california cannabis marijuana
Oakland and San Francisco are trying to even the balance.

In many of California’s major metropolises local legislators have made it a priority to enact social equity programs. The goal behind many of these social equity programs is clear: the war on drugs disproportionally affected communities of color and as a just society we need to right that wrong. In the Bay Area both Oakland and San Francisco have enacted legislation that stresses the importance of social equity programs.

We previously covered Oakland’s regulatory regime here but as a quick refresher Oakland’s ordinance requires that half of all cannabis businesses permits are issued to equity applicants. Oakland defines an equity applicant as an individual that:

  • Is an Oakland resident; and
  • Has an annual income at or less than 80% of Oakland’s average median income;
  • and either
  • Was arrested after November 05, 1996 and has a cannabis conviction in Oakland, or;
  • Has lived for 10 of the last 20 years in a number of police beats

After equity applicants, Oakland’s licensing regime gives priority to general applicants that are equity incubators. In order to serve as an equity incubator a general applicant must provide the following:

  • Providing free rent for a minimum of three years;
  • Provide a minimum of 1,000 square feet to the equity applicant; and
  • Provide the equity applicant with all required security measures.

Oakland has also realized that just providing priority processing to equity applicants alone is not enough to combat a history of disproportionate targeting of communities of color for criminal law enforcement. Oakland will also be hosting cannabis summits, orientations, and bootcamps for equity applicants. They’ve also created an online portal for equity applicants to connect with incubation partners.

San Francisco, like Oakland, has also created an equity program but has also taken the extra step by placing restrictions on who can apply for a cannabis business license. In 2018, San Francisco’s Office of Cannabis (“Office”) will only issue cannabis licenses to applicants that meet one of following criteria:

  • Qualify as an equity applicant or equity incubator;
  • Previously possess a valid medical dispensary permit under Article 33 of the Health Code;
  • Were issued a temporary cannabis business permit by the Office of Cannabis (which required you to register with the Office and show proof of operation prior to September 26, 2017);
  • Demonstrate compliance with the Compassion Use Act of 1996 (a/k/a Prop 215) and were shut down by federal prosecution or threat of federal prosecution;
  • Applied and received approval for a medical cannabis dispensary from the Planning Commission; or
  • Registered with the Office as pre-existing non-conforming operator.

On top of restricting the individuals that can obtain a license in 2018, San Francisco is placing an emphasis on social equity by granting equity applicants and equity incubators with priority processing in the permitting process. San Francisco’s equity applicant definition and incubator requirements differ from Oakland’s. In San Francisco an equity applicant is defined as someone that meets at least three of the following six conditions:

  • Meet certain household income limits (income limit varies depending on the number of people in your household);
  • Have been arrested from 1971 to 2016 for a cannabis offense;
  • Had a parent, sibling, or child arrested from 1971 to 2016 for a cannabis offense;
  • Lost housing in San Francisco after 1995 through eviction, foreclosure, or subsidy cancellation;
  • Attended school in the San Francisco Unified School District for a total of five years from 1971 to 2016; or
  • For a total of 5 years from 1971 to 2016, have lived in San Francisco census tracts where at least 17% of the households had incomes at or below the federal poverty level.

On top of those requirements there are also certain ownership interests and corporate positions that an equity applicant must hold in the cannabis business. If you want to operate a cannabis business in San Francisco in 2018 and don’t meet any of the criteria previously mentioned (prior operator or equity applicant) you’ll have to act as an equity incubator, which requires ALL of the following for three years:

  • Have local residents perform 30% of all work hours;
  • Have half your employees meet three of the six conditions for equity applicants; and
  • Provide a community investment plan with businesses and residents within 500 feet of your location.

And at least one of the following conditions:

  • Submit a plan to the Office of Cannabis for providing guidance to equity applicants running a new cannabis business; or
  • Provide an equity applicant with rent-free commercial space and use of security services for three years. The rent-free space has to equal or exceed 800 square feet or be at least 10% of the incubator’s space.

Both Oakland and San Francisco will be issuing progress reports on the status of their respective social equity programs and it will be interesting to see how many cannabis permits end up being issued. These are noble and necessary programs and we hope that they succeed. We’ll be sure to keep you posted.

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 Hayward, and before that 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 Cityof Emeryville.

san rafael california marijuana cannabis
San Rafael’s next mission: medical cannabis

Today’s post is on the City of San Rafael.

Welcome to the California Cannabis Countdown.

LocationSan Rafael is a city in Marin County and dubs itself as “The City with a Mission” which is a play off its famous chapel. San Rafael is also the county seat and economic hub of Marin. No one likes spending time in a courtroom or in government administrative offices but if you’ve got to, having a civic center designed by Frank Lloyd Wright isn’t too shabby.

History with Cannabis: Ever since the passage of the Compassionate Use Act of 1996 (a/k/a Prop 215), San Rafael has prohibited medical cannabis dispensaries and other cannabis businesses from operating within its city limits. Although Marin County and its municipalities have the reputation of being liberal and progressive, that has not translated into forward-thinking cannabis policies. As we’ve covered in the past, Marin has proven to be quite a difficult jurisdiction for cannabis businesses to enter: the well-to-do enclaves of Sausalito and Mill Valley are maintaining their commercial cannabis prohibitions. Surrounded by cannabis friendly jurisdictions (San Francisco, Richmond, Oakland, Santa Rosa, and Sonoma County), Marin’s cannabis stance is probably closer aligned to Alabama’s than the Bay Area. It’s amid this prohibitionist backdrop that San Rafael is attempting to buck the Marin malaise.

New and Proposed Cannabis Laws: On December 4, 2017, the San Rafael City Council adopted a Cannabis Urgency Ordinance (“Ordinance”). The Ordinance was San Rafael’s first attempt to regulate commercial cannabis activities although there were a couple of caveats. The Ordinance would only allow for medical commercial cannabis activities and retail dispensaries were still prohibited. The Ordinance only established the bare contours of a regulatory structure as the City Council was in a rush to pass legislation prior to statewide licensing taking effect in 2018. Upon passage of the Ordinance, San Rafael’s Medical Cannabis Subcommittee prepared a Medical Cannabis Business Resolution (“Resolution”) that built on the framework established by the Ordinance. The Resolution will be up before the City Council today, January 16th. Here are some of its highlights:

  • Up to eight medical infused products manufacturing licenses will be available otherwise known as a “Type N” license from the California Department of Public Health’s Manufactured Cannabis Safety Branch.
  • Up to four medical delivery-only licenses will be available.
  • Up to four testing laboratory licenses will be available.
  • Commercial cultivation, manufacturing (other than Type N), distribution, and storefront retail are prohibited.
  • Adult-use commercial cannabis activities are still prohibited.
  • Applications will be ranked based off of business executive summary (20 points), safety and security plan (20 points), patient benefits and education (20 points), local enterprise preference (10 points), qualification of principals (20 points), and community benefits (10 points). An Applicant must receive a total score of at least 85 points to move forward with their application. A secured location is not necessary at this stage.
  • If the number of applicants with a score of 85 or higher exceeds the maximum number of licenses available then a lottery will be conducted to determine which applications will proceed.
  • Hours of operation for medical delivery businesses will be 9am to 9pm. Labs and manufacturers can operate between 7am to 6pm.
  • Six months after the adoption of the Resolution, San Rafael’s economic development director will prepare a progress report of City Council review.

Although by no means a bold entry into regulating cannabis businesses, San Rafael is still taking the initiative – which is more than we can say about the rest of Marin’s cities (only Marin County is proceeding with a medical cannabis delivery-only ordinance). Let’s hope that by the time the City Council reviews the progress of its medical cannabis program that it will be willing to expand its cannabis license types and authorize adult-use commercial cannabis businesses.

sessions marijuana cannabis
The worst.

If your New Year’s resolution was to stop paying attention to the news you may have missed that last Thursday U.S. Attorney General Jeff Sessions formally rescinded the Cole Memo – which we covered here and here. By rescinding the Cole Memo, Sessions, whose outdated and prohibitionist stance on cannabis is well documented, has sown uncertainty in the states that have legalized cannabis use. This is especially true for the states that have legalized and are regulating adult-use cannabis businesses and individual rights.

To some extent, cannabis businesses are already feeling the effect of this new and uncertain landscape. But in following up on his antiquated stance on cannabis, did Sessions overplay his hand? Will this be a Pyrrhic victory for the prohibitionist crowd? With recent polls showing that 64% of Americans support legalizing cannabis (even 51% of Republicans support legalization) Sessions might have done cannabis proponents a favor by bringing the federal government’s stance into the national spotlight. So the next question everyone’s got to be asking themselves is “what do we do now?”

The most pressing thing that we can do is get Congress to extend the Rohrabacher-Blumenauer Amendment (“RBA”) and include adult-use cannabis into its provisions. We covered the RBA a couple of weeks ago but in case you missed it, here’s the Cliffs Notes version: the RBA is a federal budgetary provision that prohibits the Department of Justice from spending money to interfere with the implementation of a state’s medical cannabis laws. The RBA has proven to be a valuable protection for medical cannabis businesses as evidenced by the Ninth Circuit Court of Appeals ruling in U.S. v McIntosh. In McIntosh, the Ninth Circuit ruled that the DOJ could not use funds to go after medical cannabis businesses that were operating in compliance with their medical cannabis state laws.

The RBA provides medical cannabis businesses with some protective certainty (at least for those states under the Ninth Circuit’s jurisdiction), but moving forward there are two glaring concerns: 1) the RBA only applies to medical cannabis businesses; and 2) since the RBA is a budgetary provision it needs to be included in the federal budget and that budget is set to expire on January 19! The likelihood of a Republican led congress including adult-use cannabis into the RBA prior to January 19th is pretty slim, but if Republican Senators like Corey Gardner and Lisa Murkowski are serious about protecting their respective states’ residents, they will need to hold Trump and Sessions’ feet to the fire.

Legally compliant cannabis businesses have always had to deal with a level on uncertainty and risk when it comes to federal government but there’s been one industry that’s remained afraid to openly engage with cannabis businesses: the banking industry. Many observers feel that Sessions’ main goal is to slow the growth and investment in the cannabis industry by keeping cannabis businesses from obtaining bank accounts. If you want to know what a cannabis business owner has to do find proper banking, take a look at this recent piece in the New York Times Magazine where my colleague in our Seattle office, Robert McVay, was interviewed. Cannabis businesses had a difficult enough time finding banking options when the Cole Memo was in place and that won’t get easier any time soon.

To be sure, Sessions has taken an odd and extremely hypocritical stance. He fancies himself a states right guy (when convenient) and a law and order guy (always), but he would rather have cannabis businesses dealing in cash, placing everyone at greater risk. It’s time that our elected officials make access to banking for the billion dollar state-legal cannabis industry a priority. Making sure cannabis businesses have access to banking services will only increase compliance, since cannabis business that continued to operate in cash-only would immediately be flagged by regulators as suspicious. To that end, we all need to press our regulators to support the Secure and Fair Enforcement Banking Act (“SAFE Banking Act”). The SAFE Banking Act would prohibit a federal banking regulator from penalizing a banking instituting from providing services to a cannabis business. The SAFE Banking Act was introduced by Senator Jeff Merkley (D-OR) and currently has twelve co-sponsors (8 Democrats, 3 Republicans, and Bernie).

In the House of Representatives there’s the Respect State Marijuana Laws Act (“RSMA”) that was introduced by Dana Rohrabacher (R-CA) which would amend the Controlled Substances Act (“CSA”) so that its provisions would not apply to a person acting in compliance with a state’s cannabis laws. The RSMA is basically an attempt to codify the Cole Memo it had twenty-four sponsors prior to Sessions revocation of the Cole Memo -it now has thirty-seven!

It’s also time to gather support for the Marijuana Justice Act (“MJA”) that was introduced in the Senate by Senator Corey Booker (D-NJ) on August 01, 2017. The goal of Mr. Booker’s bill is to remove marijuana from the CSA and end the federal government’s criminalization of cannabis. As of this writing only one other Senator has co-sponsored the MJA, Senator Ron Wyden (D-OR). While the Cole Memo was still in place a number of senators probably didn’t fell the necessity to co-sponsor the MJA, so it will be interesting to see if that calculus will change under the new landscape.

Those of us that live in California can expect that our state government will push back against this federal encroachment against the will of Californians – as California hasn’t been afraid to take the Trump administration head on. Other states have also sued the Trump administration and although states exerting their rights are a good thing, cannabis rights (personal and commercial) will ultimately be decided on the federal level. Sessions has made his position on cannabis clear, it’s now up to Congress to speak for the people.

California cannabis marijuana
Lookin’ good!

One of the most common questions our California cannabis attorneys get asked is “where can I start or expand my cannabis business?” It can be a tough question: as we often say on this blog, every one of California’s 58 counties and 482 incorporated cities can decide whether or not they’ll authorize commercial cannabis activities in their jurisdictions. This means that California’s local jurisdictions are constantly discussing whether to regulate, amend, or prohibit commercial cannabis activities. Jurisdictions that had previously authorized medical cannabis businesses to operate are now considering how to regulate adult-use cannabis activities. This leads me to the recent (and positive) developments in Santa Rosa.

As part of our California Cannabis Countdown series we covered the city of Santa Rosa back in May. Shortly after our post, Santa Rosa residents overwhelmingly voted in favor of Measure D, which was a ballot measure setting tax rates for cannabis businesses. Santa Rosa takes its cannabis policy seriously, as the city has held over twenty (20!) meetings to discuss cannabis policy over the last two years. Many of the meetings were held by the city’s Medical Cannabis Policy Subcommittee (“Committee”).

Since inception, the Committee has solicited feedback from the community and interested stakeholders and provided guidance to the City Council. To its credit, the City Council and Planning Commission showed a willingness to incorporate the Committee’s findings into new cannabis ordinances. Specifically, the City Council passed ordinances that allowed medical cannabis cultivation (indoor only), non-volatile manufacturing, distribution, and laboratory testing in Santa Rosa. This was a welcome development after seeing what happened in Marin County, Santa Rosa’s southern neighbor.

While moving forward with regulating medical cannabis business activities, the next item on the Committee’s agenda was adult-use cannabis regulation. The Committee drafted a comprehensive cannabis ordinance that would regulate both medical and adult-use cannabis businesses. However, when the ordinance was first proposed at the end of June it did not include provisions for adult-use commercial cannabis activities. Though after the passage of Senate Bill 94 (a/k/a the Medicinal and Adult-Use Cannabis Regulation and Safety Act), the City Council added adult-use cannabis activities to the ordinance. The updated ordinance was first “noticed” in November, approved on December 19th, and will take effect on January 19, 2018.

Without further ado, then, here’s a breakdown of the types of medical and adult-use cannabis activities allowed in Santa Rosa:

  • Cultivation (only indoor for commercial cultivation although outdoor cultivation for personal use is allowed subject two a two plant limitation).
  • Manufacturing (non-volatile and volatile).
  • Distribution.
  • Retail.
  • Delivery.
  • Microbusiness.
  • Testing Laboratory.

And here are some important things to keep in mind, under the new ordinance:

  • Cannabis businesses that have already received approval to conduct medical cannabis activities can incorporate adult-use activities into their permit with a zoning clearance.
  • Multiple cannabis business permits can be issued per site so long as there is a clear separation between license types.
  • The transfer of ownership or operational control of a cannabis business is allowed if the new owner/operator receives a zoning clearance from the city.
  • For cultivators square footage is determined by the size of the structure instead of by canopy.
  • Cannabis manufacturers that utilize a closed-loop system with will require approval from the city’s building and fire departments.
  • Only licensed cannabis retailers can conduct deliveries. The delivery-only dispensary model is currently not available.
  • Dispensaries may only operate between the hours of 9:00am and 9:00pm and are prohibited from having an on-site or on-staff physician to provide a cannabis recommendation.
  • On-site consumption and cannabis special events are allowed with the appropriate city approval.

Given Santa Rosa’s dedication to the conversation on cannabis, and the actual text of its new ordinance, we can safely way that the city is shaping up as a cannabis friendly jurisdiction (unlike these tough locales). Next, we will see how efficiently the city can administer its new marijuana ordinance come January 19th. We’ll be sure to keep you posted.

ICYMI: What You Need to Know for California Marijuana Cultivation

Last week, we hosted a webinar discussing the emergency cannabis regulations released by the California state agencies in charge of administering the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). We had over 1,000 people sign up to find out what the California cannabis regulatory landscape will look like next year for cultivators, manufacturers, distributors, and retailers. It was a lot of fun!

During the webinar, we took questions from attendees, but we couldn’t get to all of them due to the sheer number of questions asked (and please keep them coming!). My colleague in our San Francisco office, Alison Malsbury, recently covered the webinar questions related to cannabis manufacturers, and in this post I’ll address the most-asked questions regarding cultivation. Without further ado, here’s the Q & A:

Q: Do you need to have a separate license if you want to have a nursery?

A: It depends. A nursery is a cultivation license type that authorizes a licensee to produce clones, immature plants, seeds, and other agricultural products for the reproduction and cultivation of cannabis. So long as you have a cultivation license from the California Department of Food and Agriculture (CDFA) you won’t need a separate nursery license for your own in-house cannabis reproduction requirements. Though you will need a nursery license if you want to distribute immature plants or seeds to another licensee.

Q: Is there a cap on the number of cultivation licenses you can hold?

A: There are currently fourteen different license types that fall under the CDFA’s jurisdiction (three more will be added in 2023). Twelve of the license types are distinguished by cultivation method (outdoor, indoor, and mixed-light) and canopy size (the designated area on the premises that contains mature cannabis plants). The other two license types are for nurseries and processors (discussed below). You can hold any number of these licenses except for the medium size a/k/a Type 3 cultivation license type (between 10,0001-22,000 square feet indoor or mixed light, and up to one acre for outdoor). For now, you (or your company) can only hold one Type 3 cultivation license at a time.

Q: Is there a statewide plant canopy cap?

A: The short answer is no, and we covered this question in greater detail here. This was by far one of the more controversial omissions to come out of the CDFA’s regulations. I call it an omission because when the CDFA released their medical regulations under the MCRSA (now withdrawn) back in April they placed a four-acre statewide cap on plant canopy for cultivators, which is now gone under MAUCRSA. Further upsetting the small-scale California cannabis farmer is the fact that in its Environmental Impact Report (released in November), the CDFA recommended a one-acre canopy cap. What motivated the CDFA to remove the acreage cap is anyone’s guess (although you can likely chalk it up to private interest lobbying of the CDFA).

Q: Will all cannabis cultivated before 1/1/2018 that enters the new market have to be tested?

A: Eventually all harvested cannabis that enters the commercial market will have to be tested but the Bureau of Cannabis Control (BCC) issued temporary rules to enable an orderly transition into the regulated commercial market for existing products, including flower. Until July 1, 2018, cannabis goods held by a licensee that were cultivated or manufactured prior to January 1, 2018 but that have not been tested may be transported and sold (with certain exceptions for manufactured cannabis goods). However, you’ll still have to affix a label to the cannabis product stating that it has not been tested and that includes the requisite government warnings.

Q: Can a cultivator transport their cannabis product to a manufacturer?

A: No. All transfer of cannabis from a licensed cultivation site must be conducted by a distributor licensed by the BCC. It’s important to note that a person or company can hold a cultivation and distribution license and they can do so on the same property so long each license type has its own separate and distinct contiguous premises on the property.

Q: Can you act as a processor if you have a cultivation license?

A: Yes. A processor is a license type that only allows for trimming, drying, curing, grading, packaging, or labeling of cannabis and non-manufactured cannabis products (i.e.,flower, shake, kief, leaf, and pre-rolls). If you hold a cultivation license (specialty cottage, specialty, small, or medium), you can process cannabis on your premises without having to obtain a separate processor license so long as you: 1) designate your processing area in your cultivation plan; and 2) you’re compliant with all packaging and labeling requirements. Notably, you cannot cultivate in the processing area and a stand alone processor cannot cultivate any cannabis.

corporate cannabis lawyer
What will you say about cannabis this holiday season?

For many of us, the holiday season means attending a number of office holiday parties. Between trying to snag egg-rolls and chicken skewers there’s a lot of networking, re-connecting, and small talk (so what do you think about Jimmy Garoppolo?). If you’re talking to a stranger, the conversation often leads to “and what do you do?” When I tell them I’m a corporate attorney who advises cannabis businesses, they usually ask about the federal government. Specifically, they ask what’s keeping the federal government from cracking down on the cannabis industry? That’s when I ask them if they’ve ever heard of James Cole, Dana Rohrabacher, and Earl Blumenauer. I then give them a brief history lesson (while keeping an eye out for new appetizers) on the Cole Memorandum and the Rohrabacher-Blumenauer amendment (formerly known as the Rohrabacher-Farr amendment).

We’ve previously covered the tenuous nature of the Cole Memo since U.S. Attorney General Jeff Sessions can revoke it at any time. Fortunately for the burgeoning cannabis industry, Sessions has managed to restrain himself and has kept the Cole Memo in place. What’s of more immediate concern is the status of the Rohrabacher-Blumenauer amendment (“RBA”).

The RBA prohibits the U.S. Department of Justice (“DOJ”) from spending money to interfere with the implementation of a state’s medical cannabis laws. The RBA has proven to be one of the strongest protections for the cannabis industry since the Ninth Circuit Court of Appeals enforced the spending prohibition against the federal government. After that ruling, the DOJ filed a motion to put a stay on one of its cases against medical cannabis growers in Washington (known as the Kettle Falls Five case). In order for the RBA to survive, either the House of Representatives or U.S. Senate appropriations committees need to attach the RBA to a federal spending bill. That federal spending bill then needs to be approved by the House and Senate and then signed by the President. The House is doing its best to keep everyone in the cannabis industry nervous this year as they blocked a floor vote on the RBA back in September. To add to the unease, Congress came dangerously close to another government shutdown this past week as it had until December 8th to pass a budget to fund the government. Congress didn’t pass a comprehensive budget but instead passed a stopgap spending bill to keep the government running – and the RBA in place – until December 22nd.

A two-week extension of the RBA does not come close to providing the stability cannabis businesses in a billion dollar industry need when making strategic business decisions, but it’s better than the alternative: a government shutdown and wild uncertainty. What the stopgap bill does do, however, is buy everyone time to call their local congressperson and Senator to voice their support for the RBA and for an end to the federal government’s antiquated (and unjust and immoral) position on cannabis. What we’ve learned in President Trump’s first year in office is that he hasn’t made cannabis policy a priority and he will most likely sign whatever spending bill Congress puts in front of him.

The President’s lack of interest in protecting the legal cannabis industry means it’s vitally important YOU call your representative to make sure the RBA is included in the spending bill that ends up on the  President’s desk. So make that call and send that email! We don’t want the conversation at the next holiday party to be in remembrance of the Rohrabacher-Blumenauer amendment.