One of the hot topics within the LA cannabis community is priority licensing. In this post, our LA cannabis attorneys will explain what priority licensing is within the city’s licensing schema, and who qualifies for it. A recently released survey from the State Department of Agriculture found that there were 2,718 cannabis operators in LA County interested in obtaining licensing for their business. Of course, the County of LA still has a ban in place on all cannabis activity which applies to unincorporated areas. For those operators who are located within the City, you may qualify for priority licensing if you were conducting cultivation or manufacturing within the city limits before January 1, 2016 and can prove it; or, if you are a dispensary and can show a valid 2016 or 2017 BTRC for your place of business. You can read more about what evidence you can use to qualify for priority here and more about LA's zoning requirements here. In other words, you don't have to have been around for centuries, as long as you can show continuous operation from the past 21 months and meet the City's other requirements.
Los Angeles cannabis lawyers are often asked "but what about CBD?"; this post is part 2 of our series on the extract.
As a derivative of cannabis, CBD is currently considered a schedule I controlled substance. However, although cannabidiol has psychoactive effects, it’s very different in effect to other, better-known cannabinoids such as THC; CBD doesn’t produce a mentally altered state or any type of euphoric ‘high.’ Instead, its main purpose lies in its wide variety of therapeutic uses. The Huffington Post writes that “CBD is a powerful anti-epileptic, anti-depressant, anti-inflammatory, anti-nauseate, sleep aid, muscle relaxant, sedative and anti-proliferative.” In other words, distilled CBD is a broadly useful form of medical marijuana that comes without traditional marijuana’s ‘drug-like’ effects. This explains why the FDA is willing to label it “beneficial.”
Of course, the medicinal value of CBD doesn’t exactly come as a surprise. As the NORML foundation writes in its statement on the FDA’s request for comment, “Seventeen states explicitly recognize [...] CBD as a therapeutic agent. Safety trials have determined the substance to be non-toxic and well-tolerated in human subjects and even the head of the US National Institute on Drug Abuse has publicly acknowledged that CBD is ‘a safe drug with no addictive effects.’” In other words, CBD is already widely understood to be beneficial. However, having the Food & Drug Administration call it “beneficial” may prove useful to the effort to have it legalized.
Despite the acceptance of CBD use in individual states, the current policy of the U.S. Justice Department, as led by Trump administration Attorney General Jeff Sessions, is to treat all forms of marijuana as schedule I controlled substances. (For more information on the current legal status of marijuana, consult our “Do I Need a Cannabis Lawyer?” blog post and California Cannabis Law FAQ.) The DEA issued a clarification in December 2016 confirming its position that it considers CBD a Schedule I substance.
This statement by the FDA might complicate that strategy, as would a WHO decision in favor of easing international restrictions on CBD: If one branch of the federal government believes that derivatives of marijuana can be straightforwardly beneficial, another branch treating them the same as dangerous narcotics doesn’t seem reasonable. In this sense, the text of the FDA’s request may be an asset to U.S. groups seeking an end to marijuana prohibition.
Cannabis, via a wide variety of consumption methods and in a myriad of forms, has a long history of use as a pain reliever. In this post, our los angeles cannabis lawyers tackle the topicals and Type 6 non-volatile cannabis manufacturing licenses.
Yesterday the City of Los Angeles released new zoning for cannabis businesses. The blue and pink maps released in June have been updated. We now have zoning for volatile manufacturing and mixed light cultivation, which is a departure from the prior draft ordinance released in June. We predicted the City was leaning towards volatile manufacturing after they released a letter earlier this month, which you can read about here. Additional areas have been added to the permitted zones for commercial cannabis activity.
Our marijuana lawyers are frequently being asked about one particular cannabis derivative: cannabidiol, also known as CBD. The popularity of cannabidiol as used in CBD-only products, which do not contain THC and are non-intoxicating by design, has surged in recent years in the wellness community. In Los Angeles, CBD products aren't just found at dispensaries, but can be bought over the counter at health shops and even a few high-end grocery stores. Given this wide acceptance, our clients often ask: “Do I need a license to sell CBD?” The answer may surprise you.
CBD can be derived from hemp as well as cannabis plants. It is a common misconception that because hemp is non-psychoactive, its derivatives are therefore non-regulated, or that because CBD isn't an intoxicant, its sale isn't subject to existing marijuana laws. In fact, both of these assumptions are wrong: Hemp and CBD are regulated by federal, state, and local law (though few local jurisdictions are currently regulating hemp). In California, the SB-94 bill does not cover hemp; instead, it's regulated by the Food and Agriculture Code, which defers to federal law under the 2014 Farm Bill. For now, the Farm Bill only allows for the cultivation of hemp for research, and also requires registration with the state.
Under federal law, the DEA has issued multiple statements to clarify that, as a cannabis derivative, CBD qualifies as a Schedule I controlled substance, the same as cannabis itself. However, this doesn't mean that CBD is without advocates beyond the state level: the FDA has determined that CBD has beneficial effects, and the World Health Organization is also evaluating the potential health benefits of CBD. You can play a role in shaping CBD policy by participating in the FDA and World Health Organization’s request for comment on CBD by September 13, 2017.
This request was made in the hopes of gaining information on the “abuse liability and diversion” of a number of drugs – in other words, how easy it is for the use of these substances to become dangerous. The official notice listed 17 drugs, with a breakdown of their specific effects and uses. Of those substances, only CBD was deemed by the FDA to have positive qualities. The WHO’s judgment about the potential benefits of this marijuana derivative, informed by the FDA's text and submitted comments, will inform the organization’s recommendations about whether CBD should have international restrictions placed on its use.
In its own way, though, the FDA’s statement may inform drug policy and cannabis law here in America. Stay tuned for part 2 of our Regulating CBD series next week.
Los Angeles cannabis lawyer Allison Margolin spoke at the State of Marijuana conference this past weekend. In this video clip, she gives an overview of the cannabis licensing process in California. If you haven't heard, you need to get local authorization (which can mean a license or something less official like local government officials signing off on your project to the state) in order to apply for a California cannabis license when it becomes available January 1, 2018. Our cannabis attorneys are familiar with local jurisdictions statewide and are actively advising our clients on the nuances and complexities of zoning, the application process, and compliance with local ordinances.
In a letter published today, the Los Angeles City Council’s Rules, Elections, and Intergovernmental Relations Committee (Rules Committee) advised the City Planning Department that they support the allowance of Type 7 (so called "volatile") manufacturing within the City of LA. The letter represents a signficant policy shift on the City's part, since the Draft Operating Requirements released in June only allowed for non-volatile. Our Los Angeles cannabis attorneys are often asked what the difference is - any extraction process that uses flammable substances (including CO2) is considered "volatile" and would require a Type 7 license from the state. These labs are also subject to stringent safety requirements, which are discussed further in our prior post on volatile manufacturing.
One of the most frequent questions our cannabis lawyers get from savvy business owners is: How can I legally market my cannabis products? As with many branches of marijuana law, cannabis business advertising regulations are complex because they fall under an overlapping set of legal regimes, some of which are in conflict with each other. When considering advertising cannabis four bodies of law apply: Federal, State, Local, and Internet TOS (the terms of service and operating contracts that govern your relationships with digital advertising hosts). Cannabis marketers must navigate all four sets of regulations here.
Federal Law places an absolute ban on cannabis advertising under the Controlled Substances Act of 1970. The Act stipulates: “It shall be unlawful for any person to place in any newspaper, magazine, handbill, or other publications, any written advertisement knowing that it has the purpose of seeking or offering illegally to receive, buy, or distribute a Schedule 1 controlled substance.” Further, “It shall be unlawful for any person to knowingly or intentionally use the Internet, or cause the Internet to be used, to advertise the sale of, or to offer to sell, distribute, or dispense, a controlled substance where such sale, distribution, or dispensing is not authorized by this subchapter or by the Controlled Substances Import and Export Act.” In other words, as far as federal law is concerned, there's no such thing as a legal marijuana advertisement.
California has recently placed regulations on marketing under the MAUCRSA (aka SB-94). This means that, if the regulations are followed, an advertisement can be in compliance with California law. Among its requirements are that advertisements must identify the license number of the advertiser, must not be targeted at individuals younger than 21, and must not contain false or misleading information about the products advertised. While these standards are relatively straightforward, figuring out how to advertise within the existing marijuana laws can be tricky even for California-based businesses. Local laws may differ from the state regulations, and a host of pending legislation like AB-175 (Marijuana: county of origin: marketing and advertising) and AB-76 (Adult-use marijuana: marketing) may change the state’s standards even further.
On top of that, the terms of service of online sites which host advertisements, such as Google and Facebook, often ban any mention of marijuana, on the basis that federal law still forbids it – since, of course, any online advertisement can be seen outside of California. This rapidly evolving area of law will be discussed at the State of Marijuana Conference this weekend in downtown Los Angeles, where attorney Allison Margolin will be leading a panel on Next-Gen Cannabusiness Marketing. For more information, check our guide to California cannabis business law or contact us at firstname.lastname@example.org to speak with one of our Los Angeles cannabis lawyers.
In addition to the City of Los Angeles Public Comment hearing on Measure M last night, Bellflower's City Council held a meeting this week. On Monday night, the main room where the night's public discussion was scheduled was filled to capacity. The crowd was drawn to the meeting by one of the subjects on the city council's agenda for that night: Bellflower's approach to cannabis. As one of only three cities in LA county (along with Long Beach and Maywood) that have passed a cannabis ordinance and are either issuing licensing or about to, there's clearly no shortage of interest in Bellflower's path toward legalization. We were among the many cannabis lawyers, entrepreneurs, and business owners, in attendance, and we left the meeting with the new information you need about Bellflower.
Bellflower’s mayor made it clear that the city will only be issuing 12 permits for cannabis-related business activities. The mayor did not specify exactly how many of these permits will be allotted to each type of activity. However, it's clear that applications will be made available for dispensary, cultivation, distribution, and manufacturing. The application fee is a whopping, non-refundable $25,000. Furthermore, this fee will be levied annually in addition to standard business taxes. The application will open September 27, 2017, and applicants will be required to submit both a Conditional Use Permit Application and a Cannabis Business Permit Application.
Each application will be evaluated on its merits, and the strongest applications will receive licenses. The City made it clear that there is not an explicit criteria or point system to rate each application. However, in order to be considered for a license, companies must have at least $400,000 in liquid funds, as well as either ownership of the property they are operating out of or a long-term lease of at least 10 years. The City made it clear that businesses which have operated continuously are preferred, and that companies may not submit one application for multiple types of business activities. (For example, a company interested in both cultivation and distribution must apply for the two licenses separately.)
One additonal bright spot of the meeting was the city’s promise to grandfather in all compliant medicinal license holders once recreational sales licenses become available.
Check back with us for regular updates - this is a fast-moving time for cannabis licensing in Los Angeles County.
One of the questions any Los Angeles cannabis lawyer encounters most frequently is: what about the banking issue? Cannabis remains a largely unbanked industry. And while you are still required to pay all of your federal, state, and local taxes, that often means dealing with large amounts of cash, which creates security and accounting risks for legal cannabis businesses. A stateside bank that services legal cannabis businesses could close some of these gaps, but still faces the risk of federal asset forfeiture.
On August 10th, the Cannabis Banking Working Group (CBWG) and California State Treasurer John Chiang held the last of six meetings in Los Angeles to address these concerns, as well as how a public bank that services legal cannabis businesses could generate revenue for the state. Since California is the world’s sixth largest economy, the way the state implements a banking system will be a bellwether for other states that have implemented medical marijuana regulations, as well as a game changer for legal cannabis operators in general.
Kevin Klowden, economist and Executive Director of the Milken Institute, stated that in order for public banks to operate, they would need to generate a depository system that is specifically designated to cannabis businesses, creating a “safe alternative to an all-catch operation” which would be separate from the federal government. This public bank model would allow for small- and medium-sized deposits, turning them into targeted loans which could be used to make money. In order to do so, a public bank would require a master account number, similar to a routing number, which would assist in identifying the sources of funds and entities. This master account number would also allow for basic bank services, such as check deposits and transferring of funds. With federal oversight, the government would have the ability to oversee and approve such transactions. If money is coming from an institution that they have flagged as suspicious, e.g. cannabis businesses, they have the ability to block such transactions. To avoid this, the state would need to create a situation where the federal government cannot interfere with small deposits. The structure of such deposits must be separated and clearly distinct between any chartered public bank.
The Bank of North Dakota (BND), the only public state-owned bank in the country, has created a similar business loan program. The deposits made into BND are insured by the state, as opposed to the FDIC. Because BND has control over their institution, their default rate has been extremely low. As such, BND’s public bank model has proven to be effective and profitable. A program fitting this model, if adopted in Californiam could provide services to legal cannabis businesses. That said, as long as cannabis is classified as a Schedule I drug, the federal government can still intervene at any time. Nevertheless, implementing an alternative route for cannabis businesses to deposit their funds creates a “safe haven” for these businesses.
Public banking systems would create security plus opportunity, predictability, and sustainability for the primary stakeholders in California’s transition to a “new cannabis economy.” Unless the state of California handles cannabis currency first, private banks will continue to be reluctant to do so. The only “magic bullet” here, as Chiang mentioned in his opening remarks, is to remove cannabis from being classified as a Schedule I drug under the Controlled Substances Act altogther. However, that change seems to be a long way off. In the interim, though it will be complicated, there is growing momentum and consensus behind the need for a public bank that services legal cannabis businesses in California, and we’ve already seen that it is possible to create such a bank in another state.