California was the first state to legalize medical marijuana in 1996 with the passage of the Proposition 215, the Compassion Use Act (the “CUA”). The CUA allowed for patients and caregivers to collectively grow, share, and possess as much medical marijuana as was necessary to address the patient’s debilitating medical condition. There was no discussion of distribution, or state or local business licensing, in the CUA.
In 2003, the California State Assembly passed Senate Bill 420, which established an identification card system for medical marijuana patients. SB 420 also allowed for the formation of patient non-profit collectives to provide marijuana to patients. In 2008, the California Attorney General issued long-awaited guidelines on medical marijuana enforcement. The guidelines recognize two alternative ways for medical marijuana to be distributed: through legally defined non-profit “cooperatives” or “collectives.” The guidelines also specify that coops and collectives pay sales tax on MMJ transactions; distribute only to members, and that they acquire, possess and distribute only lawfully cultivated marijuana. At this time, California’s medical marijuana businesses may elect to continue to be governed by the CUA, SB 420, the Attorney General’s guidelines, and any applicable local regulations until January 9, 2019, when the protections for collectives and cooperatives is expected to expire.
In 2015, the California State Assembly passed the Medical Cannabis Regulatory Safety Act (“MCRSA”). MCRSA for the first time created a statewide seed to sale set of medical marijuana regulations. Among the 17 classes of licenses authorized by this law are cultivation licenses, dispensary licenses, infused products licenses, testing labs, transportation licenses, and distribution licenses. Likewise, in November 2016, California voters approved Prop. 64, the Adult Use Marijuana Act (“AUMA”). AUMA created a model that is similar to, but not identical to, MCRSA. Again, AUMA anticipated seed to sale tracking, state licensing, local licensing, limits on licenses to avoid monopolization, and other similar rules as are found in MCRSA.
Finally, on June 15, 2017, the California Legislature passed Senate Bill 94, which merged the provisions of both the MCRSA and AUMA to form a single unified set of laws to govern both medicinal and adult-use cannabis. This Act, formally known as the Medicinal and Adult-Use Cannabis Regulatory Safety Act, or “MAUCRSA,” effectively harmonized the laws under MCRSA and AUMA making the system easier to navigate for both medicinal and adult-use businesses. Notably, among other changes, MAUCRSA removed all residency requirements for licensees (originally contained in AUMA), harmonized the license types for both medicinal and adult-use businesses (including vertically integrated businesses), allowed for the co-location of medicinal and adult-use businesses, and provides for the same operational requirements for both adult-use and medicinal businesses. Moreover, on November, 16, 2017, the Bureau of Cannabis Control within the Department of Consumer Affairs, CalCannabis Cultivation Licensing within the Department of Food & Agriculture, and the Manufactured Cannabis Safety Branch within the Department of Public Health, issued their emergency regulations to regulate commercial cannabis activity under the authority granted to those regulatory bodies under MAUCRSA. While California began to issue the first temporary state licenses on January 1, 2018, under those emergency regulations, the state’s cannabis regulations have yet to be finalized. The final rulemaking process commenced in July of 2018, where the three regulatory bodies released their proposed final regulations. Once through the regulatory and rulemaking process as mandated by the California Administrative Procedure Act, the final rules are expected to be adopted and implemented by December of 2018. McAllister Garfield, P.C. has been actively engaged in the rule making process in California for the past several years, and is uniquely positioned to guide our clients into compliance with both State and local laws and ordinances with our experienced attorneys strategically located throughout the state to help better serve our clients.
In the meantime, numerous local municipalities and counties continue to enact ordinances and regulations permitting or banning commercial cannabis activities within their jurisdictions. Most of these initiatives deal with taxation of marijuana sales, but some of the measures legalized the operations of businesses for the first time in places like Long Beach and La Mesa, among other locations. The important work to be done now in California is identifying favorable local laws that will allow your business to operate under MAUCRSA.
McAllister Garfield, P.C. is well positioned to play an active role in the emergence of a fully regulated marijuana market in California. With its extensive experience in managing the transition from an unregulated to a regulated market in Colorado, McAllister Garfield, P.C. is ready to help California entrepreneurs manage the transition. The Firm has lawyers and offices in Los Angeles, Bay Area and Santa Cruz at this time and expects to continue to expand in the coming years. Sean McAllister is personally licensed to practice law in California and has been actively participating in the rule making process.