California Passes Bill to Regulate Medical and Adult-Use Markets

California Passes Bill to Regulate Medical and Adult-Use Markets

The Bureau of Cannabis Control will oversee all cannabis businesses in the state once Gov. Brown signs the bill into law.

June 19, 2017

After the California State Senate passed SB 94, the cannabis budget trailer bill, on Thursday, the legislation is out of the state legislature and is fast-tracked to become state law.

The bill passed in the Senate with 31 in favor and three opposed.

According to an email letter to constituents from Hezekiah Allen, executive director of the California Growers Association, California’s new legislation, the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) will govern both medical and adult-use marijuana and become the foundation for regulated cannabis activity in the state. Previous regulations for the medical market were laid out in the Medical Cannabis Regulation and Safety Act (MCRSA) of 2015, which has been repealed and replaced with MAUCRSA.

As noted by Allen, the bill to regulate the adult-use market is “the culmination of nearly three years of focused work that brought together stakeholders with a broad spectrum of perspectives and required the investment of tens of thousands of hours.” In April, California Governor Jerry Brown proposed that MCRSA and Proposition 64, the Adult Use of Marijuana Act (AUMA), merge into one regulatory system that has now become MAUCRSA.

The Bureau of Cannabis Control will oversee all cannabis businesses in the state once Gov. Brown signs the bill into law.

Nicole Howell Neubert, attorney at California-based cannabis industry law firm Clark Neubert LLP, believes the trailer bill clarifies issues that have been vexing the firm’s clients since Proposition 64 was passed, such as how the laws will work together, what will happen to the medical market, which licenses are able to be held and how to structure businesses.

“It is incredibly encouraging to see the state and the industry work so quickly and well together to accomplish the goal of getting one set of rules in place before next year,” Howell Neubert said. “Having this detailed framework finally allows us to advise our clients clearly and confidential about initial state licensing.”

Although she acknowledges that this is only the beginning of a constantly evolving set of laws and regulations, Neubert is happy to see the legislation pass so that progress can be made under one set of regulations.

According to a blog post written by Alison Malsbury on Harris Bricken Canna Law Group’s Canna Law Blog, MAUCRSA creates the Bureau of Cannabis Control as the governing bureau. The types of licenses available for commercial adult-use and commercial medicinal cannabis activity will be the same, but producing dispensary and transporter licenses are not available. “The licenses available under both the MCRSA and the AUMA will continue to be available for both kinds of activity, and for specialty cottage cultivation licenses and microbusiness licenses, and, commencing on January 1, 2023, licenses for large outdoor, indoor, and mixed-light cultivation will also be available for both medicinal and adult-use cannabis activity,” wrote Malsbury.

MCRSA limited the combinations of medicinal cannabis licenses an individual could hold until Jan. 1, 2026, but MAUCRSA will not apply these limits, except that testing laboratory licensees cannot obtain licenses to engage in any other commercial cannabis activity. Harris Bricken’s blog also points out that those applying for cultivation licenses will need to identify the source of water supply under the new legislation.

In a previous interview with Cannabis Business Times, Neubert said key to developing regulations is ensuring that as many operators as possible can get licensed, and with California home to 50,000 to 60,000 farms, other states are looking to see how the state deals with this market regulation, as well as important environmental issues.

Neubert and her law firm are most excited about regulations in the bill that help small businesses compete in California’s market.

“We are especially heartened to see the specific authorization of non-storefront dispensaries and the creation of the Cannabis Cooperative Associations, both of which were important for small businesses to compete,” she said. “It’s encouraging to see these priorities supported by our lawmakers, and we hope it is a good sign that we are creating a California industry that has room for everyone, regardless of size and pocketbook.”

According to Harris Bricken, other regulations stipulate quality assurance, inspection and testing requirements of cannabis and cannabis products; a cannabis excise tax that will be measured by the average market price of retail sale and additional advertising requirements. In addition, the Bureau of Cannabis Control will lose the authority to regulate and control industrial hemp.

Neubert hopes that as the legislation surrounding the state’s medical and adult-use markets develops, other issues and challenges are taken into consideration, such as banking.

“Obviously banking remains a serious challenge for our clients and the industry. So it is important that the State Treasurer is looking closely at this issue in addition to the related regulatory efforts of the Legislature and Governor’s Office that is clear from the bill,” she said.

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