california CUA collective MAUCRSA
Is the tide finally coming in for gray market California cannabis?

For state-by-state legalization to succeed in the long run, state and local governments often need to take significant enforcement measures against existing “gray” cannabis markets to ensure that there’s an even playing field for licensed operators who face the financial pinch and responsibility of comprehensive licensing regulations and robust taxation. To date, each state with an existing, unregulated medical cannabis industry has taken action to make sure that unlicensed, unregulated medical cannabis operators don’t undermine or disenfranchise their otherwise licensed counterparts (see Washington State as a prime example, or the continuing legislative efforts in Oregon).

It appears that California is finally taking certain steps to stop the unlicensed and illegal sale of cannabis within its borders. To regulators’ credit, they don’t have a choice but to tolerate the Compassionate Use Act (“CUA”) collective model through early 2019: the MAUCRSA preserves the criminal immunity of CUA collectives and cooperatives up to one year after the first MAUCRSA licenses begin to issue. The drop dead date on those collectives and cooperatives is now January 9, 2019.

Although these CUA collectives and cooperatives can continue to serve qualified patients and their caregivers without the administrative annoyance or cost of having to comply with MAUCRSA, they can’t engage in the for-profit sale of cannabis or any level of “commercial cannabis activity” without a license. However, many of these collectives and cooperatives continue to engage in illegal commercial cannabis activity: such activity is hard to monitor and police where the CUA has pretty much no government oversight. In addition, many CUA collectives and cooperatives believe that they can do business with MAUCRSA temporary and/or annual licensees (and vice versa), but this is just another piece of unreliable industry hearsay that violates the law.

In turn, California has started sending cease and desist letters to unlicensed operators they believe to be engaged in commercial cannabis activity in violation of MAUCRSA. And regulators have also started to crackdown on ancillary advertisers, like Weedmaps, for promoting unlicensed operators and their products in violation of MAUCRSA marketing and advertising restrictions. Certainly, these won’t be the last efforts we see regarding the takedown of illegal cannabis operators in California. Here’s what else we can expect:

  1. Industry self-policing. It’s highly unlikely that licensed operators are going to allow CUA collectives and cooperatives to take away their market share and/or to conduct sales of cannabis without facing the same onerous state and local taxes as licensees. As a result, we’re likely to see a spike in industry reporting on CUA collectives and cooperatives that don’t have a MAUCRSA license.
  2. Increased scrutiny of ancillary businesses. Going after Weedmaps represents the state’s willingness to chase third parties that are directly or indirectly assisting illegal operators. We can expect then that consultants, landlords, equipment sellers/lessors, etc., who assist or continue to assist unlicensed operators violating MAUCRSA will feel the same heat as Weedmaps.
  3. Policing of attorneys. Yes, there are still attorneys forming CUA collectives and cooperatives with the sole purpose of helping their clients evade MAUCRSA licensing to make one last stream of profit before 2019. At this point, if a potential client wants to engage in the commercial cultivation, manufacture, distribution, and/or sale of cannabis, helping them start a CUA collective or cooperative is unethical and constitutes malpractice.
  4. Getting local governments involved. Half the problem with current CUA collectives and cooperatives violating MAUCRSA is that local laws still allow them to operate in a completely gray area. Sometimes, local governments haven’t even regulated under MAUCRSA but they have and maintain existing laws that only allow for CUA collectives and cooperatives. State regulators would be wise to dialogue with local governments about CUA collectives and cooperatives acting in violation of MAUCRSA. Otherwise, those collectives and cooperatives will have free reign under local law to continue to violate MAUCRSA through January of next year.
  5. Federal intervention. If CUA operators ignore state mandates to cease commercial cannabis activity, there’s a solid chance that state regulators (and local governments) will call upon U.S. prosecutors to assist in sweeps. Given Sessions’ rescinding of the Cole Memo in January, U.S. Attorneys are going to act in accordance with the resources and priorities of their districts. And if local and state governments demand action in regards to violations of MAUCRSA, we can expect more arrests and prosecutions from the Feds.

Let us know what you are seeing out there, and what you expect to see in the coming year for California enforcement against gray market cannabis.

  • foodforthought

    A little respect for history, please. No one should promote the canard that marijuana is dangerous–inherently toxic–like pharmaceutical drugs. Marijuana is not a ‘drug’, unless we lean heavily on Merriam-Webster’s third and broadest definition, as something that affects the mind. By that definition, religion and television (‘the plug-in drug’) should also be included.

    There are differences between drugs and medicinal herbs.

    Drugs are often useful, but typically burdened with cautionary notes and lists of side effects as long as one’s arm. ‘The works of Man are flawed.’. ‘New’ drugs must be unique creations, different enough from existing ‘approved’ drugs to merit their own patents. They are tested for ‘safety’ among limited groups of ‘subjects’, and therefore carry lists of cautionary notes and warnings–everything lawyers can imagine–implying that the contents have not been proved safe or suitable for all persons.

    Medicinal herbs are cultivated, bred, and refined over many years, often over centuries. They are judged successful when they benefit many persons, and are found safe for use within general populations.

    “The Nixon campaign in 1968, and the Nixon White House after that had two enemies: the anti-war left and black people. We knew we couldn’t make it illegal to be either against the war or black, but by getting people to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities. We could arrest their leaders, break up their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course we did.” –John Ehrlichman

    Activists have since found that marijuana is the ‘gateway’ away from alcohol and opiate addictions. Here prohibition of cannabis has been built on a tissue of lies: Concern For Public Safety. Our new laws save hundreds of lives every year, on our highways alone. In November of 2011, a study at the University of Colorado found that in the thirteen states that decriminalized marijuana between 1990 and 2009, traffic fatalities dropped by nearly nine percent—now nearly ten percent in Michigan—more than the national average, while sales of beer went flat by five percent. No wonder Big Alcohol opposes it. Ambitious, unprincipled, profit-driven undertakers might be tempted too.

    In 2012 a study released by 4AutoinsuranceQuote revealed that marijuana users are safer drivers than non-marijuana users, as “the only significant effect that marijuana has on operating a motor vehicle is slower driving”, which “is arguably a positive thing”.

    No one has ever died from an overdose of marijuana. It’s the most benign ‘substance’ in history.

    Marijuana has many benefits, most of which are under-reported or never mentioned in American newspapers. Research at the University of Saskatchewan indicates that, unlike alcohol, cocaine, heroin, or Nancy (“Just say, ‘No!’”) Reagan’s beloved nicotine, marijuana is a neuroprotectant that actually encourages brain-cell growth. Researchers in Spain (the Guzman study) and other countries have discovered that it also has tumor-shrinking, anti-carcinogenic properties. These were confirmed by the 30-year Tashkin population study at UCLA.

    Marijuana is a medicinal herb, the most benign and versatile in history. In 1936 Sula Benet, a Polish anthropologist, traced the history of the word “marijuana”. It was “cannabis” in Latin, and “kanah bosm” in the old Greek and Hebrew scrolls, quite literally the Biblical Tree of Life, used by early Christians to treat everything from skin diseases to deep pain and despair. Why despair? Consider the current medical term for cannabis sativa: a “mood elevator”. . . as opposed to antidepressants, which ‘flatten out’ emotions, leaving patients numb to both depression and joy.

    The very name, “Christ” translates as “the anointed one”. Well then, anointed with what? It’s a fair question. And it wasn’t holy water, friends. Holy water came into wide use in the Middle Ages. In Biblical times, it was used by a few tribes of Greek pagans. And Christ was neither Greek nor pagan.

    Medicinal oil, for the Prince of Peace. A formula from the Biblical era has been rediscovered. It specifies a strong dose of oil from kanah bosom, ‘the fragrant cane’ of a dozen uses: ink, paper, rope, nutrition. . . . It was clothing on their backs and incense in their temples. And a ‘skinful’ of medicinal oil could certainly calm one’s nerves, imparting a sense of benevolence and connection with all living things. No wonder that the ‘anointed one’ could gain a spark, an insight, a sense of the divine, and the confidence to convey those feelings to friends and neighbors.

    Don’t want it in your neighborhood? Maybe you’re not the Christian you thought you were.

    Me? I’m appalled at the number of ‘Christian’ politicians, prosecutors, and police who pose on church steps or kneeling in prayer on their campaign trails, but cannot or will not face the scientific or the historical truths about cannabis, Medicinal Herb Number One, safe and effective for thousands of years, and celebrated as sacraments by most of the world’s major religions.