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.
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.
As California gears up for the full legalization of adult-use commercial cannabis, entrepreneurs across the state are considering breaking into the marijuana industry. However, the entry costs for marijuana businesses can be high, and the exact legal requirements for starting an operation are often confusing. Given this background, a would-be cannabis enterpreneur might wonder: is it worth it for a new marijuana business to hire an attorney?
On this subject, it's fair to take a cannabis law firm's comments with a grain of salt – a little like asking a barber whether you need a haircut. That said, as lawyers with years of experience providing legal support to california's top cannabis businesses, we're familiar with the legal demands of the cannabis industry in California. Given this inside perspective, we will advise you that the state and local laws which marijuana businesses must adhere to are extremely complex and intertwined, with harsh consequences possible for even relatively minor violations. In this context, our view is that it's a dangerous gamble to try to maintain a business in the cannabis industry without a cannabis attorney.
Of course, we can’t advise anyone to enter the industry in the first place – according to federal law, possessing, using, or selling marijuana in any capacity is still entirely illegal. The only thing protecting California marijuana consumers and businesses from federal prosecution is the Department of Justice's decision to allow “state and local authorizes [sic] to address marijuana activity through enforcement of their own narcotics laws.” While this federal deference to state law has been the norm since 2013, there's no guarantee that this won't change in the near future, especially given that Trump administration appointees like Attorney General Jeff Sessions have announced their intent to crack down on marijuana use. To avoid federal prosecution, then, it's crucial to stay within the bounds of state and local law. However, in a state as large as California, this is easier said than done.
While California currently affords limited immunity from prosecution to certain marijuana businesses, many cities and counties don't, which means that even a business which follows state law to the letter could be operating in a manner that violated local regulations. Our Los Angeles cannabis lawyers have advised hundreds of businesses who ran into issues with Prop D and have defended their rights since even before that regulation was passed. With the new cannabis regulations being introduced into the City of LA, it is important to speak to a los angeles cannabis attorney who is familiar with the regulations and can advise you on how to set up your business for success. (For more on these changes, see our recent blog posts on LA marijuana licensing.)
Retaining a cannabis lawyer provides a degree of access and ease in interpretation of these regulations that a private citizen doesn't have. Though it's easy to find information online, but the amount of outdated, contradictory, misleading, or outright false advice on marijuana business on the internet is nothing short of overwhelming.
For these reasons, it's worth considering hiring a california cannabis attorney for your business. Not only does having legal counsel help you stay within the law, it helps offset the financial risk inherent to any new business by ensuring that your organization's paperwork and cannabis licensing applications are in order. For more information or to arrange a consultation with one of our los angeles cannabis lawyers, check our brief overview of California's marijuana laws or email us at firstname.lastname@example.org.
New Regulations will be released in Fall 2017 and the agencies will use emergency rulemaking to pass them.
From the Bureau of Medical Cannabis Regulation:
Earlier this spring, the Department of Consumer Affairs’ Bureau of Cannabis Control, Department of Public Health and Department of Food and Agriculture released proposed regulations for the Medical Cannabis Regulation and Safety Act. These licensing authorities held public hearings and accepted written comments regarding the proposed regulations. However, in late June, the Legislature passed and the Governor signed into law, the Medicinal and Adult-Use Cannabis Regulation and Safety Act, which creates one regulatory system for both medicinal and adult-use cannabis. As a result, the licensing authorities will withdraw the proposed medical cannabis regulations noticed for public comment on April 28 and May 5, 2017. The withdrawal is likely to happen early next month.
The three cannabis licensing authorities are each developing new proposed regulations based on the new law for the commercial medicinal and adult-use cannabis industries. During this process, the licensing authorities will consider the robust and valuable public comment received regarding the proposed medical cannabis regulations.
The licensing authorities will use the emergency rulemaking process for the new proposed regulations. The emergency regulations are expected to be published in fall 2017. The implementation date for the issuance of commercial cannabis licenses remains the same: January 2, 2018.
For additional information about the Bureau, or to subscribe to email alerts to hear about updates as they become available, please visit our website www.bmcr.ca.gov.
It sounds like a dream, but it's not – a billion dollar black market is now a legitimate business option. If you are an entrepreneur already in the industry and looking to legalize your business, you may be confused or lack foundational knowledge about the new state and local regulations on operating a compliant cannabis business. Below are answers our Los Angeles cannabis lawyers receive most often:
1) Are owners of commercial adult-use and commercial medicinal cannabis companies required to be California residents in order to obtain a license?
No. The residency requirements of the AUMA have been repealed by the MAUCRSA. In other words, “out of staters” and even residents of other countries can freely participate. Read more about the new State Laws in our Guide.
2) What area of the commercial cannabis industry is the easiest to break into?
Delivery Service requires the least start up capital and has the fewest barriers to entry.
3) Where is the best place to get a license?
There are 482 cities and 58 counties in California. Each municipality has different requirements. Call us to find out what’s best for you!
4) What type of licenses are available?
Distribution, Cultivation, Manufacturing, Testing, Micro business, Nursery and Retailer.
5) What type of Business Organization do commercial cannabis companies have to be?
Every commercial cannabis business must currently operate as a non-profit (see H&S Code 11362.765(a)), although the laws are expected to change to allow for-profit entities.
6) Will my cannabis businesses be discontinued by the federal government?
Hopefully not, as long as you are in strict compliance with state & local laws and your commercial activities are strictly medical.
7) How many licenses can an owner have?
The MCRSA does not specifically limit the number of licenses a person may hold of a particular license type; however, it does limit the types of licenses a person may hold at one time. Specifically, testing lab or large cultivation license holders may only hold a license in that specific area.
8) Can I have my old marijuana felony dismissed or reduced to a misdemeanor?
In many circumstances, yes. Call us to discuss.
9) Do I still need a recommendation to buy cannabis?
At the moment, yes! The law for commercial adult use does not go into effect until January 2018.
10) Where can I get my complex questions answered?
to set up a meeting with our team in Los Angeles or San Francisco.