(1)The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances.

The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. MAUCRSA generally divides responsibility for the state licensure and regulation of commercial cannabis activity among state licensing authorities depending on the type of license classification sought by the applicant. MAUCRSA authorizes licensing authorities to create new state licenses relating to commercial cannabis activity that the licensing authorities deem necessary to effectuate their duties by adopting regulations to that effect.

MAUCRSA requires that, with the exception of testing laboratory licenses, which can be used to test cannabis products regardless of whether for commercial adult-use or commercial medicinal cannabis, all licenses issued under MAUCRSA bear a clear designation indicating whether the license is for adult-use activity or medicinal activity, as specified.

This bill would allow a licensee to conduct any commercial cannabis activity allowed under its license with any other licensee, as specified, and would find and declare that this furthers the purpose of the initiative measure.

(2)AUMA authorizes legislative amendment of its provisions with a ²/₃ vote of both houses, without submission to the voters, to further its purposes and intent.

This bill would declare that its provisions further the purposes and intent of AUMA.

Date of Hearing: May 9, 2018

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 2929

Author:(Quirk) – As Introduced Ver:February 16, 2018

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill allows a cannabis licensee to conduct any commercial cannabis activity allowed under its license with any other licensee, except as otherwise prohibited.

FISCAL EFFECT:

Minor and absorbable costs to the Bureau of Cannabis Control to modify the licensing and enforcement system to accommodate this change (Cannabis Control Fund).

COMMENTS:

1. Purpose. This bill is sponsored by Caliva, a medical marijuana dispensary, to allow the cannabis industry to remain flexible with their plants and ensure the sustainability of the medical market.
2. Background. Voter-approved propositions legalized medicinal cannabis in 1999 and recreational cannabis use in 2016. Subsequent legislation established a combined regulatory structure for both, with the bulk of licensed activity overseen by the Bureau of Cannabis Control. This bill would allow adult-use licensees (A-licensees) and medicinal licensees (M-licensees) to conduct business between themselves, regardless of whether the licensee holds an A or M license. This is a shift from current regulations that stipulate that licensees may only conduct business with other licensees of the same type.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: April 17, 2018

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Evan Low, Chair

ABPCA Bill Id:AB 2929

Author:(Quirk) – As Introduced Ver:February 16, 2018

SUBJECT: Cannabis.

SUMMARY: This bill would allow cannabis licensees, including those that have only obtained a license for adult-use or medicinal cannabis business, to conduct business with any other cannabis licensee.

EXISTING LAW:

1. Establishes the Bureau of Cannabis Control (Bureau), under the Department of Consumer Affairs (DCA), to establish a comprehensive system to control and regulate the, distribution, transport, storage, , processing, and sale of cannabis products. (Business and Professions Code (BPC) Section 26000 et seq.)
2. Sets requirements for licensure of cannabis related businesses. (BPC Section 26051.5)
3. Specifies that commercial cannabis activity may only be conducted between licensees. (BPC Section 26053)
4. Beginning July 2018, A-licensees may only conduct business with other A-licensees and M-licensees may only conduct business with M-Licensees, except for testing laboratories. (California Code of Regulations (CCR) Section 5032) (Note this is an emergency regulation adopted by the Bureau of Cannabis Control; final regulations have not yet been adopted.)

THIS BILL:

1. Would allow licensees to conduct commercial cannabis activity with any other licensee, not just A or M licensees.

FISCAL EFFECT: Unknown. This bill is keyed fiscal by Legislative Counsel

COMMENTS:

Purpose. This bill is sponsored by Caliva. According to the author, “There are no distinguishing traits between an adult use and medical use cannabis plant, or its derivatives or distribution methods. The only difference is the designation afforded to it because of its license type. Until a product is sold to an adult use customer or a medical use customer, it’s all just cannabis. AB 2929 makes it explicit that any licensee may conduct business with any other licensee so long as the activity is allowed by their respective licenses and is not otherwise prohibited by the code. This will allow industry to remain flexible with their plants and ensure the sustainability of the medical market.”

Background. This bill would allow adult-use licensees (A-licensees) and medicinal licensees (M-licensees) to conduct business between themselves, regardless of whether the licensee holds an A or M license. This is a shift from current regulations that stipulate that licensees may only conduct business with other licensees of the same type.

History of Legal Cannabis in California. In 1996, California voters passed Proposition 215, legalizing the use of medical cannabis (MC) in the state. In October 2015, nearly 20 years after the authorization of the use of MC, Governor Jerry Brown signed into law a trio of bills [AB 243 (Wood), Chapter 688, Statutes of 2015, AB 266 (Bonta, Cooley, Jones-Sawyer, Lackey, and Wood), Chapter 689, Statutes of 2015, and SB 643 (McGuire), Chapter 719, Statutes of 2015] collectively known as the Medical Cannabis Regulation and Safety Act (MCRSA). MCRSA established the state’s first comprehensive regulatory framework for MC.

In 2016, the voters of California passed Proposition 64, the Adult Use of Marijuana Act (AUMA) to legalize the recreational use of cannabis in the state by 2018. In June 2017, AUMA and MCRSA were combined via the budget process to form one system for the regulation of cannabis, MAUCRSA.

Current law. Existing law and its interpretation by the bureau has resulted in regulations that strictly prohibit conducting business between A and M licensees. Though this provision is not implemented until July 1, 2018, there exists concern within the industry that this prohibition will result in negative repercussions for industry and stakeholders alike.

Chief among the complaints of existing regulations is that they do not acknowledge that cannabis plants and the products they yield are indistinguishable until they reach the point of total dosing or packaging. In other words, a cannabis plant could be used for either medicinal or adult-use or both; the flower, oil, or other associated products are identical. The exception to this is in total dosage, which for adult-use may not exceed 100 mg THC per package and in medicinal can far exceed that standard. Despite the difference in total allowable dosage, many manufacturers only sell 100 mg packages in the interest of streamlining the manufacturing process.

Potential benefits. Advocates of this legislation argue that allowing A and M licensees to do business with one another would prevent oversaturation of expensive and perishable inventory that is identical to products in the other product stream, other than its labeling. Additionally, it may limit the role of the black market if licensees are able to more readily acquire and sell product without being constrained by the distinction between A and M license types. A clear exception would be products that exceed dosing standards for adult-use retail.

Prior Related Legislation. SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017) of the current legislative session combined AUMA and MCRSA into one system for the regulation of cannabis, resulting in MAUCRSA.

AB 64 (Bonta, Cooley, Jones-Sawyer, Lackey, Wood) of the current legislative session seeks to reconcile a number of differences between MCRSA and AUMA to provide clarity in regulation and enforcement of both medical and recreational cannabis. STATUS: This bill was passed by the Assembly Committee on Business and Professions on April 18, 2017 and was held in the Assembly Committee on Appropriations.

ARGUMENTS IN SUPPORT:

The California Cannabis Manufacturers Association writes, “Given the track and trace requirements for every plant, as well as the substantial regulatory requirements for every licensee, this firewall between A and M adds nothing to the public safety while creating complications for licensed businesses in the industry. For these reasons, we offer our support of AB 2929 and respectfully encourage its passage.”

Flow Kana writes, “During the first 6 months of 2018, the regulations provided that cannabis licensees could do business with one another regardless of their M or A designation. AB 2929 would make permanent this interoperability of the cannabis supply chain and help ensure businesses remain viable in both the M and A cannabis markets.”

The California Cannabis Delivery Alliance writes, “On behalf of the California Cannabis Delivery Alliance, with chapters in Los Angeles, San Diego, the Bay Area, and Marin county, I want to express our support for AB 2929 (Quirk) Cannabis Supply Chain Interoperability.”

ARGUMENTS IN OPPOSITION:

None on file

POLICY ISSUE(S) FOR CONSIDERATION:

It is notable that the creation of legalized cannabis for adult-use and medicinal use was done separately with a lapse in time between them. As both were done via the initiative process 20 years apart, it is worth acknowledging the possible intent of the voters in allowing the two systems. This could be attributed to a change in public perception of cannabis but it should be acknowledged and monitored as the bill progresses to address potential concerns from constituents.

REGISTERED SUPPORT:

California Cannabis Manufacturers Association

Flow Kana

California Cannabis Delivery Alliance

REGISTERED OPPOSITION:

None on file

Analysis Prepared by: Jimmy Fremgen / B. & P. / (916) 319-3301