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California’s New Cannabis Regulations Approved by the State Office of Administrative Law, Now in Effect

On January 16, 2019, California’s three state cannabis licensing authorities announced that the Office of Administrative Law officially approved state regulations for cannabis businesses across the supply chain, from cultivation to retail.

Background

California’s new cannabis regulations went into effect immediately, replacing previously adopted emergency regulations.The previous emergency regulations were drafted after California voters approved Proposition 64, commonly known as the Adult Use of Marijuana Act, which legalized recreational cannabis use in California. The emergency regulations, adopted by the Bureau of Cannabis Control, California Department of Public Health and California Department of Food and Agriculture in December 2017 and readopted in June 2018, were originally issued through the emergency rulemaking process to meet the legislative mandate to open California’s regulated cannabis market on January 1, 2018. Now that the new regulations have been approved, the emergency regulations are no longer in effect.

The Regulations

California’s cannabis regulations are found in Title 16 of the California Code of Regulations, Division 42. The regulations provide licensing and enforcement criteria for commercial cannabis businesses in California, including distributors, retailers, microbusinesses, temporary cannabis events, and testing laboratories. The regulations are also meant to inform licensing applicants about the meaning of key statutory terms, and to provide specific clarification about conditions and prohibitions for complying with the Medicinal and Adult-Use Regulation and Safety Act (MAURSA).

The regulatory changes included clarifying sections and provisions of the regulations that were impacted by recent legislative changes to MAURSA, such as expanding the locations that temporary cannabis events can be held at and preventing the sale and transport of cannabis goods that are labeled with terms that would create a misleading impression that the product is an alcoholic beverage. Additional changes included clarifying which individuals in a multi-layer business structure must be disclosed as owners or financial interest holders in an application for a commercial cannabis business and expanding on a distributor’s ability to label or re-label cannabis goods with the amounts of cannabinoids and terpenoids after receiving a certificate of analysis for regulatory compliance testing.

Deliveries of Cannabis

Although there were many changes made to the regulations, the area getting perhaps the most attention relates to deliveries, as the regulatory changes made noteworthy changes to rules governing cannabis deliveries. The most significant, § 5416, subdivision (d), was amended to clarify that a delivery employee may deliver to any jurisdiction within the State of Californiaprovided that such delivery is conducted in compliance with all delivery provisions of the regulations. This change is particularly important because local jurisdictions, cities and counties in California, are given wide discretion over whether to allow recreational cannabis activities. For example, some cities and counties prohibit any cannabis dispensaries from operating within their borders. Despite this, the new regulations would allow licensed businesses to deliver cannabis products to customers within any California city or county.

Technology Platforms

Section 5415.1 is a new section that was added to the regulations to clarify the use of technology platforms by licensed retailers in the sale and delivery of cannabis goods. This is an important area of regulation because technology platforms, such as mobile apps, are a growing way to facilitate commercial transfer of cannabis goods to customers. These platforms are akin to commonly used food apps, like “Uber Eats” or “DoorDash,” allowing a customer to download the app, place an order for a cannabis product, and get it delivered straight to their door. On a related note, subsection (a) of § 5418 was amended to specify that the value of cannabis goods carried in the delivery vehicle cannot exceed $5,000 at any time.

Conclusion and Implication

The permanent new regulations are an important step towards establishing the cannabis industry as a thriving part of California’s economy. Chief of the Bureau of Cannabis Control, Lori Ajax, expressed that “These approved regulations are the culmination of more than two years of hard work by California’s cannabis licensing authorities … Public feedback was invaluable in helping us develop clear regulations for cannabis businesses and ensuring public safety.”

Each licensing authority’s final regulations and rulemaking documents have been posted to the California Cannabis Portal and are accessible online at the following link: https://cannabis.ca.gov/cannabis-regulations/

(Nedda Mahrou)

Cannabis Law & Regulation

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