Final Release of California Cannabis Regulations

Posted by Margolin & Lawrence on June 7, 2018

After numerous iterations, the final regulations officially went into effect on June 6, 2018 and are set to expire on December 4, 2018. These amended emergency regulations were initially released to the public on May 18, and then filed with the Office of Administrative Law on May 25, 2018. The state’s regulatory agencies proposed changes to certain provisions in order to provide greater clarity to licensees and address issues that have arisen since the emergency regulations went into effect. The re-adoption of the emergency regulations have extended the effective period for an additional 180 days. After the California Office of Administrative Law (OAL) posted the proposed emergency regulations on their website, there was a five-day public comment period on the finding of emergency.

The Bureau of Cannabis Control have made adjustments to the activity permitted under each type of cannabis license. While adult-use (type “A”) and medical (type “M”) licenses are still distinct from one another, applicants may complete one license application and request an A-designation, an M-designation, or both for the license. In any case applicants will only pay one licensing fee. Perhaps the most significant revision, licensees may now engage in commercial cannabis activities with any licensee, regardless of “A” or “M” designation. The California Department of Public Health (CDPH) is advocating for this to become a permanent measure. The CDPH’s endorsement of this clause ensures that cannabis manufacturers’ operations, processes and requirements are the same for both the adult-use and medicinal markets.

Concerning the licensing process, any financial interest now includes an agreement to receive a portion of the profits of a business. The re-adoption also clarifies what items must be identified on a premises diagram so the BCC can determine whether the proposed premises meets the requirements for licensure. Under Title 11, California Code of Regulations, Article 56, Section 118.1, applicants are required to use the Commercial Cannabis Licensee Bond form when applying for licensure. Other minor changes were made to the emergency regulations, such as the clarification clause concerning a licensee’s notification requirements when specific modifications such as standard operating procedures, license designations, premises location, etc. are made to the business.

The CDPH now prohibits cannabis products from containing more than 0.5% alcohol by volume but provides an exception for tinctures, a concentrated cannabis product taken by dropper (usually under the tongue) in small doses. Other requirements, such as packaging limits, were also specifically proposed for tinctures within the new regulations. Henceforth, cannabis manufacturers will be required to all label cannabis products that are over 1,000 mg for “Medical Use Only” prior to sending the product to the distributor. Another provision established by the CDPH established the shared-use (type “S”) cannabis manufacturing facilities that went into effect on April 13, 2018. This license-type allows cannabis manufacturers (holding a type-S license) to use the facilities of a type 7, 6 or N licensee (“Primary Licensee”) if both parties agree to alternate use of the facilities.

The California Department of Food and Agriculture has revised the definition of “canopy” to clarify how a canopy will be measured for indoor, mixed-light, and outdoor license types, and a definition of “light deprivation” has been added to provide clarification for determining license types. Section 8100 has been revised to include three new items that must be included with a temporary cannabis cultivation license application: a proposed cultivation plan, identification of applicable water sources, and evidence of enrollment in water-quality-protection programs with the applicable Regional Water Quality Control Board or State Water Resources Control Board (or written verification from the appropriate board that enrollment is not necessary).

As these changes came into effect following the five-day public comment period that ended on May 30, 2018, the re-adoption of the Bureau’s emergency regulations marked some important changes to the licensure process, affecting all current and future cannabis business activity. The revision that will have most affect on the commercial behavior of California’s cannabis market occurred under Section 8214 of the regulations, allowing licensees to conduct business with each other regardless of adult-use and medical designation of the license. The provides a greater degree of synchrony between distribution chains, and presumably provides some relief to overburdened government agencies.

For legal representation and consultation regarding your existing or proposed cannabis business, contact Margolin & Lawrence at (323) 653-9700 or email us at info@margolinlawrence.com

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.