After nearly 19 years of relatively unregulated legal medical marijuana, California’s governor Jerry Brown on October 9 signed new legislation that specifies grow limits and other provisions.
Since Proposition 215, also known as the Compassionate Use Act, became law in 1996 — the first modern era medical cannabis legislation to be passed in the U.S. — the Golden State’s cultivators, processors, dispensaries, and patients have been relatively liberated, but also mired in legal and regulatory ambiguity.
The legislation signed by Brown was passed by the California Legislature in September and is quite comprehensive. It creates detailed oversight of what has become a multi-billion dollar industry, even if one considers only the 39 million residents of this celebrated West Coast state. The law details:
“…virtually every aspect of the business in California — from licensing and taxation to quality control, shipping, packaging, and pesticide standards.”
Some experts claim California currently sports about 4,000 cannabis dispensaries, with one source claiming 2,500 in January 2011. One of the biggest problems for the past almost two decades has been a lack of uniformity between counties and municipalities when it comes to the regulation of medical cannabis cultivation and sales. This has been confusing and frustrating for not only dispensary customers and the businesses that serve them, but also law enforcement and prosecutors. Now that the legislature in Sacramento has finally acted, much of this disparity in regulations between different areas of California should gradually disappear.
After signing the legislation, Brown told the media that the new rules will help ensure that patients have access to medical cannabis while also satisfying the need for government oversight through standardization, accountability, and reporting. The law, which includes a detailed tracking system, according to Brown:
“…sends a clear and certain signal to our federal counterparts that California is implementing robust controls not only on paper, but in practice.”
One Act of Three Bills
California’s new medical cannabis law is actually comprised of three separate pieces of legislation: Assembly Bills 266 and 243 and Senate Bill 643. Collectively labeled the Medical Marijuana Regulation and Safety Act (MMRSA), these laws synergize to create a regulatory structure with oversight for state and local licensing, taxation, and commercial medical cannabis cultivation — as well as manufacturing, distribution, transportation, testing, and even sales of cannabis and cannabis products. It’s a system that could easily be applied to recreational sales if the state’s ballot measure passes in November 2016.
Unfortunately, the licensing segment of this act won’t be ready for prime time until roughly January 2018. When available, business applicants must choose from 17 types of annual businesses licenses, including those for indoor and outdoor cultivation facilities, processors/manufacturers, testing labs, and dispensaries. This progressive legislation even recognizes what is, for most states, a new class of business license: Distributors.
Cannabis distributors are defined by the state of California as licensed parties responsible for all secure transport of medicinal cannabis between cannabis-related businesses. The law literally overnight creates a new niche industry that will eventually employ thousands of hard working, tax-paying Californians and undoubtedly improve the economy by decreasing unemployment and increasing tax revenues.
Despite some routine controversy and political maneuvering, the new act goes a long way toward protecting businesses and employees from criminal law and asset forfeiture — as long as they comply with the regulations. For those willing to play within the system and accept a law that, like all legislation, is a compromise intended to satisfy both conservative and progressive lobbyists and voters, the business of medical cannabis is definitely improving in California.
Environmentalists and Patients Happy
One of the biggest debates in California, even among advocates of medical and recreational cannabis, is the environmental impact of large outdoor grows, especially those operated by unscrupulous cartels, organized crime seeking only profit, or sloppy amateurs. State and federal authorities have busted many large outdoor cultivation efforts to find damage to the local landscape, including use of water diverted from local streams and rivers (sometimes sucking them dry and negatively impacting the local ecosystem).
Under the state’s new regulations, marijuana farms will be required to track and report all water use, including providing the state with documentation regarding the sources of their water. This is a big win for environmentalists and conservationists who have pointed out for years how some rogue farmers in California had been diverting wild streams to propel their profitable pot plants.
Assemblyman Jim Wood, a Democrat from Healdsburg, helped craft part of the legislation that makes environmental concerns a priority, giving California’s nine regional water quality boards the authority to regulate the use of water by cultivators. These boards will also be regulating any chemicals or sediment that are released into the environment by a cultivation facility.
Wood added that, although the new, very detailed regulations will definitely increase operational costs for businesses in the industry, they will also better protect patients. He suggested that the new regs are a good tradeoff, saying:
“There’s a price to pay, and part of that is the regulatory structure that goes along with that.”
Patients and their advocates are also happy because of the testing requirements stipulated by the new laws. Cannabis dispensed to patients will be required to be batch tested for potency, which will likely include cannabinoid and terpene profiles, information that’s critical for understanding medical efficacy and high type and maintaining a sincere, successful dispensary infrastructure. Laboratory testing will also be required for contaminants, such as pesticides and solvent residue from the manufacture of concentrates like BHO.
According to Lauren Vazquez, Deputy Director of Communications for the Marijuana Policy Project:
“New guidelines for testing and labeling products will ensure patients know what they are getting and that it meets appropriate standards for quality.”
Industry-standard labeling and tamper-resistant security packaging will also be required by California’s medical dispensaries in the future. The combination of thorough and commercial-scale testing with packaging and labeling that helps prevent diversion, theft, and access by children or unauthorized users lends powerful protection to patients pursuing pot — while also helping to keep the feds at bay by illustrating the state’s attention to detail and industry best practices.
In other words, these new laws are, in some respects, California’s way of sending a message to the federal government: “You can stop hassling our medical cannabis patients and businesses now, we finally have it under control.” Unfortunately, the new act will unlikely prevent future raids by the DEA throughout the state.
Deliveries and Plant Tracking
California has been home to a burgeoning cannabis delivery business. Often catering exclusively to medical patients, but sometimes counting recreational consumers among their customers, services like Speed Weed in Los Angeles (which employs 25 drivers and boasts 19,000 enrolled patients), California Cannabis Delivery, also in L.A., and Medithrive Direct and Foggy Daze, both in San Francisco, are using 21st century Web 3.0 tools to establish viable businesses. They are applying bleeding edge mobile app tech and social media know-how to what has been legal in California for nearly a quarter century.
It has been reported that there are more than 2,600 cannabis delivery services nationwide, often serving the customers of an individual dispensary, like how mainstream pharmacies sometimes offer delivery services to their sick or elderly customers who are housebound. This number reflects a 300 percent increase in only three years, with only 877 such businesses on the scene back in 2012.
While the ability of large licensed dispensaries to deliver to their customers is protected under the Compassionate Use Act, municipalities are still allowed to ban delivery — although they cannot ban transport through their area to reach another. Riverside, outside of Los Angeles, is just one of dozens of examples of communities that currently ban cannabis deliveries. Often, municipalities that ban sales also prohibit deliveries within their borders.
California will be joining a slew of other medical cannabis states, such as Maryland and Nevada, that require seed-to-sale tracking. Such tracking involves a potent dose of IT wizardry, database-driven systems, and cloud-synced storage to trace the path and real-time status of a plant from seedling or clone through the vegetative and flowering stages of growth, including drying and curing during harvest. Such systems, employing batch or lot numbers that also tie into a variety of types of lab testing, also track cannabis through processing, packaging, labeling, distribution, and retail sale. This makes any adverse reactions among patients traceable to an exact batch produced by a particular cultivator or processor, enabling determination of root cause and helping ensure safe access.
As noted above, no law regarding any industry, especially one as inherently controversial and potentially emotional as cannabis, is without compromise. The MMRSA is no exception. Unfortunately, the act will phase out collectives and cooperatives, forcing them to regroup or become in violation of the new law when enforcement begins for collectives on January 1, 2018. How this will affect decades-old operations like WAMM in Santa Cruz, the nation’s oldest continuously operating medical cannabis collective, remains unknown.
While patients are still permitted to cultivate limited quantities of their own cannabis, the size of grow spaces has been capped. Gardens will be limited to 100 square feet. In addition, registered patients would be prohibited from selling or even donating cannabis to another person (unless they are licensed). An inability to gift cannabis to a friend, especially if grown by oneself, is a harsh penalty in a progressive state like California that has successfully spearheaded many cannabis campaigns and set trends nationwide in terms of the kind herb. Fortunately, this provision of the act is difficult to enforce.
At the production level, cultivation restrictions will vary according to the type of grow facility; outdoor gardens will be limited to one acre, while indoor cultivators will be prohibited from exceeding a half acre. This will effectively ban large-scale cultivation corporations, like those appearing to serve other states, from entering California (with the exceptions of existing companies).
Local municipalities will enjoy new power and responsibility and will be required to issue a permit to any business that desires to legally operate under the new act within its jurisdiction. In other words, cannabis-related businesses will be required to obtain the blessing of the local government. With so many communities already having banned sales, this permit granting authority may, in some cases, result in businesses being unfairly shut out of particular communities due to competitive forces or a city council populated by elected officials of a prohibitionist mindset. (It is estimated that 70 percent of counties and municipalities in Colorado have banned all marijuana sales.)
While the legislation will prevent certain types of vertical integration, such as a single company owning multiple types of businesses (i.e. cultivation and processing facilities), it will allow limited cross-ownership, including permitting some cultivators to also own and operate one or more dispensaries. Businesses that have been granted the right to currently operate in multiple license categories would be grandfathered exceptions to the new act, guaranteeing them the ability to continue legal operation until 2026. This is a big win for established canna-businesses trying to create brand awareness and expand market share.
Patient Protection and Industry Standards
In addition to better protecting patients with cannabis industry standards like seed-to-sale tracking and real, laboratory-grade testing, California’s new MMRSA will also resolve several areas of ambiguity for the businesses serving them. In addition, police and law enforcement officials will now have a more precise and detailed set of state laws to act as a better determinant of their policies when they are forming their enforcement strategy.
The creation of a cannabis distribution industry, as well as the encouragement of small business and plentiful market competition, will surely lead to maintaining or improving the quality of cannabis and related products across the board for California’s patients, including improvements to its economy and ecology. The new MMRSA will ensure safe access to cannabis in a more democratic and egalitarian environment. The act will also create a more even playing field for medical cannabis businesses, encouraging powerful competition, one of the regulatory and market factors that has made Colorado a leader in legal herb.
Unfortunately, while the act will not prevent individual municipalities from banning sales or deliveries within their borders, it will allow for the identification and possible prosecution of companies that fail to live up to the state’s new patient-focused and environmentally conscious medical cannabis laws.
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