The Control, Regulate and Tax Adult Use of Marijuana Act (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 under the jurisdiction of the Department of Cannabis Control. Existing law authorizes certain employees of the California Department of Tax and Fee Administration (CDTFA) or a peace officer to enter and inspect a place at which cannabis or cannabis products are sold, cultivate, or stored and authorizes the CDTFA or a law enforcement agency to seize cannabis or cannabis products in certain circumstances, such as if the person is unlicensed, among others. Existing law makes refusal or failure to allow an inspection a misdemeanor and a violation of the Cannabis Tax Law, generally a misdemeanor.

Under existing law, the Department of Cannabis Control is authorized to issue a citation to a licensee or unlicensed person for any act or omission that violates or has violated any provision of specified statutes or regulations. Existing law authorizes the department to assess an administrative fine not to exceed $5,000 per violation by a licensee and $30,000 per violation by an unlicensed person.

This bill would make the possession of the universal symbol in connection with a commercial activity a violation, as described, and would make each individual package, label, advertisement, or other object bearing the universal symbol a separate violation. The bill would require a person using or possessing the universal symbol in connection with a commercial activity to maintain and produce records that the use or possession is in connection with licensed commercial activity. The bill would make a package, label, advertisement, or other document or object of any kind bearing the universal symbol contraband and require it to be seized and summarily forfeited. The bill would authorize the person from whom a package, label, advertisement, or other document or object is seized to petition for return of the object, as specified. The bill would make an exception for the educational, informational, or other noncommercial use or possession of the universal symbol. The bill would expand the places and items authorized for certain employees of the CDTFA or a peace officer to inspect and seize to include any place where any package, label, advertisement, or other document or object of any kind bearing the universal symbol are sold or stored. By expanding the locations authorized for entry and inspection, the bill expands the scope of a crime and imposes a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Control, Regulate and Tax Adult Use of Marijuana Act (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 under the jurisdiction of the Department of Cannabis Control. Existing law authorizes certain employees of the California Department of Tax and Fee Administration (CDTFA) or a peace officer to enter and inspect a place at which cannabis or cannabis products are sold, cultivate, or stored and authorizes the CDTFA or a law enforcement agency to seize cannabis or cannabis products in certain circumstances, such as if the person is unlicensed, among others. Existing law makes refusal or failure to allow an inspection a misdemeanor and a violation of the Cannabis Tax Law, generally a misdemeanor.

Under existing law, the Department of Cannabis Control is authorized to issue a citation to a licensee or unlicensed person for any act or omission that violates or has violated any provision of specified statutes or regulations. Existing law authorizes the department to assess an administrative fine not to exceed $5,000 per violation by a licensee and $30,000 per violation by an unlicensed person.

This bill would make the possession of the universal symbol in connection with a commercial activity a violation, as described, and would make each individual package, label, advertisement, or other object bearing the universal symbol a separate violation. The bill would require a person using or possessing the universal symbol in connection with a commercial activity to maintain and produce records that the use or possession is in connection with licensed commercial activity. The bill would make a package, label, advertisement, or other document or object of any kind bearing the universal symbol contraband and require it to be seized and summarily forfeited. The bill would authorize the person from whom a package, label, advertisement, or other document or object is seized to petition for return of the object, as specified. The bill would make an exception for the educational, informational, or other noncommercial use or possession of the universal symbol. The bill would expand the places and items authorized for certain employees of the CDTFA or a peace officer to inspect and seize to include any place where any package, label, advertisement, or other document or object of any kind bearing the universal symbol are sold or stored. By expanding the locations authorized for entry and inspection, the bill expands the scope of a crime and imposes a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Control, Regulate and Tax Adult Use of Marijuana Act (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 under the jurisdiction of the Department of Cannabis Control. Existing law authorizes certain employees of the California Department of Tax and Fee Administration (CDTFA) or a peace officer to enter and inspect a place at which cannabis or cannabis products are sold, cultivate, or stored and authorizes the CDTFA or a law enforcement agency to seize cannabis or cannabis products in certain circumstances, such as if the person is unlicensed, among others. Existing law makes refusal or failure to allow an inspection a misdemeanor and a violation of the Cannabis Tax Law, generally a misdemeanor.

Under existing law, the Department of Cannabis Control is authorized to issue a citation to a licensee or unlicensed person for any act or omission that violates or has violated any provision of specified statutes or regulations. Existing law authorizes the department to assess an administrative fine not to exceed $5,000 per violation by a licensee and $30,000 per violation by a unlicensed person.

This bill would make the possession of the universal symbol in connection with a commercial activity a violation, as described, and would make each individual package, label, advertisement, or other object bearing the universal symbol a separate violation. The bill would require a person using or possessing the universal symbol in connection with a commercial activity to maintain and produce records that the use or possession is in connection with licensed commercial activity. The bill would make a package, label, advertisement, or other document or object of any kind bearing the universal symbol contraband and require it to be seized and summarily forfeited. The bill would authorize the person from whom a package, label, advertisement, or other document or object is seized to petition for return of the object, as specified. The bill would make an exception for the educational, informational, or other noncommercial use or possession of the universal symbol. The bill would expand the places and items authorized for certain employees of the CDTFA or a peace officer to inspect and seize to include any place where any package, label, advertisement, or other document or object of any kind bearing the universal symbol are sold or stored. By expanding the locations authorized for entry and inspection, the bill expands the scope of a crime and imposes a state-mandated local program.

The Control, Regulate and Tax Adult Use of Marijuana Act (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 under the jurisdiction of the Department of Cannabis Control.

Under existing law, the Department of Cannabis Control is authorized to issue a citation to a licensee or unlicensed person for any act or omission that violates or has violated any provision of specified statutes or regulations. Existing law authorizes the department to assess an administrative fine not to exceed $5,000 per violation by a licensee and $30,000 per violation by a unlicensed person.

This bill would specify that a citation may be for a claim or representation of a product as licensed cannabis without a license, including the unlicensed use of the cannabis universal symbol. make the possession of the universal symbol in connection with a commercial activity a violation, as described, and would make each individual package, label, advertisement, or other object bearing the universal symbol a separate violation. The bill would make an exception for the educational, informational, or other noncommercial use or possession of the universal symbol.

The Control, Regulate and Tax Adult Use of Marijuana Act (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 under the jurisdiction of the Department of Cannabis Control.

Under existing law, the Department of Cannabis Control is authorized to issue a citation to a licensee or unlicensed person for any act or omission that violates or has violated any provision of specified statutes or regulations. Existing law authorizes the department to assess an administrative fine not to exceed $5,000 per violation by a licensee and $30,000 per violation by a unlicensed person.

This bill would specify that a citation may be for a claim or representation of a product as licensed cannabis without a license, including the unlicensed use of the cannabis universal symbol.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1126

Author:(Lackey)

As Amended Ver:August 21, 2023

Majority vote

SUMMARY

Specifically provides that the unlicensed use of the cannabis universal symbol is a violation of the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA) and empowers the California Department of Tax and Fee Administration (CDTFA) to seize unlicensed cannabis products bearing the universal symbol as contraband.

Senate Amendments

1. Relocate the provisions of this bill expressly making the unlicensed use of the cannabis universal symbol to a different code section.
2. Require a person using or possessing the universal symbol in connection with commercial activity to maintain and produce records about that use.
3. Provide that any package, label, advertisement, or other document or object bearing the universal symbol unlawfully is subject to seizure by the CDTFA.
4. Exempt educational, informational, or other noncommercial use or possession of the universal symbol from the provisions of this bill.

COMMENTS

A report published by the Reason Foundation estimates that as much as two-thirds of cannabis sales in California take place on the black market. This is consistent with widespread consensus that illicit cannabis continues to proliferate notwithstanding the enactment of MAUCRSA. Because unlicensed cannabis products do not receive state oversight and enforcement of various health and safety requirements, including laboratory testing, consumption of unlicensed cannabis products can pose a significant risk to consumers. In August 2019, the number of emergency department visits related to cannabis vaping products sharply increased, with a total of 2,807 hospitalized cases or deaths reported to federal Centers for Disease Control and Prevention in the United States. It is believed that much of this "vaping crisis" was the result of untested, unlicensed manufactured cannabis products.

Enforcement against the black market has attracted significant legislative attention, particularly within the California State Assembly. A task force was recently established through the 2022-23 Budget process to promote communication between state and local entities engaged in the regulation of commercial cannabis activity and facilitate cooperation to enforce applicable state and local laws. Existing law authorizes the Department of Cannabis Control (Department) to take enforcement action for violations of MAUCRSA. The Department can issue a citation to either a licensee or an unlicensed person, which can include an order of abatement and a fine of up to $5,000 for licensees and $30,000 for unlicensed individuals. This authority allows the Department to issue a citation to licensees who sell cannabis products that do not comply with MAUCRSA, or to black market operators.

However, statute does not specifically state that falsely claiming or representing unlicensed cannabis as being licensed is an enforceable violation of MAUCRSA and its implementing regulations. The author and sponsors of this bill contend that this is an issue as some consumers may unknowingly consume unlicensed products without realizing that they have not met the state's regulatory requirements. Examples have been provided of illicit cannabis products that appear from their packaging to be licensed, including by featuring the universal symbol.

MAUCRSA requires the Department to promulgate regulations setting standards for the manufacturing, packaging, and labeling of all manufactured cannabis products, including a requirement that products be provided to customers with sufficient information to enable the informed consumption of the product, including the potential effects of the cannabis product and directions as to how to consume the cannabis product, as necessary. MAUCRSA also required those regulations to include a universal symbol for all edible products that contain cannabinoids.

Section 17410 of the Department's current regulations requires the following graphic symbol to be featured on the packaging of various cannabis products, including cannabis seeds, edibles, vape cartridges and integrated vaporizers, and nonmanufactured cannabis goods:

The universal symbol is required to be "black or white in color" and "shall be made conspicuous by printing the symbol on a contrasting color." The symbol must be at least one-half inch, except in the case of cannabis vape cartridges or integrated cannabis vaporizers, where it must be no smaller than one-quarter inch. The regulations prohibit the symbol from being altered or cropped in any way other than to adjust the sizing for placement on the primary panel.

The author and sponsors of this bill believe that featuring the universal symbol on an illicitly manufactured cannabis product actively deceives cannabis consumers into believing they are purchasing safe, legal, tested products. While selling cannabis products without a license or without otherwise complying with MAUCRSA is already illegal, the author believes there should be specific penalties for this type of deceptive behavior. This bill would specifically provide that unlicensed use of the universal symbol is a violation of MAUCRSA and would authorize the CDFTA to seize any product found to be using the universal symbol unlawfully.

According to the Author

"While state law requires cannabis licensees to use the universal symbol on all packaging, nothing in law prohibits the use of the symbol by non-licensees. As a result, the universal symbol is widely used by non-licensees to legitimize intoxicating hemp products and illicit cannabis products with potency levels that far exceed the limits set allowed by the limits allowed by Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). In fact, empty "cannabis" packages are available for bulk purchase at most local tobacco and smoke shops and online for pennies per package specifically designed to fooling the consumer into believing the product placed inside is safe and legal. This bill makes fraudulent use of the universal symbol a crime and seeks to enhance consumer confidence in legal cannabis products."

Arguments in Support

The California Cannabis Manufacturers Association and Kiva Confections are co-sponsoring this bill, each writing: "AB 1126 would enact necessary improvements to the California Department of Cannabis Control as well as the California Department of Tax and Fee Administration to provide critical support to the growing legal market and help to protect consumers from unlicensed businesses. The culture around the legal cannabis industry recognizes the necessity of legislation such as AB 1126, as to protect consumers and put money back into the regulated market."

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

VOTES:

ASM BUSINESS AND PROFESSIONS: 18-0-0

YES: Berman, Flora, Alanis, Alvarez, Bonta, Chen, Dixon, Gipson, Grayson, Irwin, Jackson, Lee, Lowenthal, McCarty, McKinnor, Stephanie Nguyen, Joe Patterson, Ting

ASSEMBLY FLOOR: 79-0-1

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner Horvath, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Hart, Holden, Hoover, Irwin, Jackson, Jones‑Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

ABS, ABST OR NV: Haney

SENATE FLOOR: 39-0-1

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ABS, ABST OR NV: Caballero

UPDATED

VERSION: August 21, 2023

CONSULTANT: Robert Sumner / B. & P. / (916) 319-3301 FN: 0002364

 THIRD READING  

Bill No: AB 1126

Author: Lackey (R), et al.

Amended: 8/21/23 in Senate

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 13-0, 7/10/23

AYES: Roth, Nguyen, Alvarado-Gil, Archuleta, Ashby, Becker, Dodd, Eggman, Glazer, Niello, Smallwood-Cuevas, Wahab, Wilk

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 79-0, 4/17/23 (Consent) - See last page for vote

SUBJECT: Cannabis: citation and fine

SOURCE: California Cannabis Manufacturers Association

Kiva Confections

DIGEST:

This bill makes it a violation for a person to use or possess the cannabis universal symbol, established through regulations, in connection with commercial activity, other than licensed commercial cannabis activity, as specified; requires a person using or possessing the universal symbol in connection with commercial cannabis activity to maintain records and produce records upon demand, as specified; and, provides the California Department of Tax and Fee Administration (CDTFA) with authority to seize a package, label, advertisement, or other document or object in violation of the universal symbol use and deem it contraband, as specified.

ANALYSIS:

Existing law:

1. Establishes the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and adult-use cannabis. (Business and Professions Code (BPC) § 26000)
   
2. Establishes the Department of Cannabis Control (DCC) to administer and regulate provisions of MAUCRSA. (BPC § 26010)
   
3. Requires all cannabis and cannabis products labels and inserts to include the following information displayed in accordance with requirements, including font size, prescribed by the DCC:

“GOVERNMENT WARNING: THIS PACKAGE CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.” (BPC § 26120 (c)(1)(A))

1. Requires the following statement in bold print for cannabis products:

“GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.” (BPC § 26120(c)(1)B))

1. Requires the DCC to promulgate regulations governing the licensing of cannabis manufacturers and standards for the manufacturing, packaging, and labeling of all manufactured cannabis products, as specified, and requires all edible cannabis products be marked with a universal symbol as determined by the DCC through regulation. (BPC § 26130(a)(c))

This bill:

1. Makes it a violation for a person to use or possess the universal symbol in connection with commercial activity other than commercial cannabis activity licensed under MAUCRSA, as specified.
   
2. Requires a person using or possessing the universal symbol in connection with commercial cannabis activity to maintain records establishing that the use or possession is in connection with commercial cannabis activity, and produce those records upon demand of a peace officer, an employee of the DCC or an employee of the CDTFA.
   
3. Makes each individual package, label, advertisement, or other document or object of any kind bearing the universal symbol in violation of 1) above a separate violation.
   
4. Makes a package, label, advertisement, or other document or object of any kind bearing the universal symbol in violation to be seized and summarily forfeited to the state, as specified, and a peace officer or employee of the DCC may summarily seize such contraband.
   
5. Makes failure to maintain or produce records in connection with a package, label, advertisement, or other document or object of any kind bearing the universal symbol contraband, as specified.
   
6. Permits a person from whom a package, label, or advertisement or other document or object is seized as specified in 4) above, to petition the superior court of the county in which the seizure occurred, within 10 days of the seizure, to seek the return of the package, label, advertisement, or other document or object; and, further requires the petitioner to bear the burden of proving, by a preponderance of the evidence, that the package, label, advertisement, or other document or object was not used or possessed in connection with commercial activity other than licensed commercial cannabis activity, as specified.
   
7. Specifies that 1) above does not prohibit the educational, informational, or other noncommercial use or possession of the universal symbol.
   
8. Authorizes the CDTFA to seize any package, label, advertisement, or other document or object of any kind bearing the universal symbol in violation, as specified, and deemed contraband and any package, label, advertisement, or other document or object seized by the CDFTA to be deemed forfeited, as specified.
   
9. Makes other clarifying changes.
   

Background

Cannabis Regulatory Background. Beginning in 2018, Prop 64 permitted adults 21 years of age or older to legally grow, possess, and use cannabis for nonmedical purposes, with certain restrictions. Additionally, in 2018, because of Prop 64 and as codified in MAUCRSA, the state implemented a cannabis cultivation and excise tax, which imposes a weight-based tax on production of cannabis and a 15% tax on those who purchase cannabis or cannabis products that are sold in the state.

In 2021, DCC was established with both licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicants, licensees, and local governments.

Under current law, a separate license is required for every corner of the cannabis market, which includes growing cannabis, transporting cannabis, making cannabis products, testing cannabis products, selling cannabis, and holding an event where cannabis is sold. Each license type is distinct and must be approved before operating. As specified in BPC § 26050, there are currently 20 license types, including 14 different cultivation license, 2 manufacturers, and one each testing laboratory, retailer, distributor, and microbusiness. In order to obtain a state license, the applicant must obtain approval from its local jurisdiction.

There continues to be growing problems reported within the legal cannabis market; one of which is the illegal cannabis market-those products that are not grown, cultivated, tested, distributed, processed, manufactured, or sold at retail under the same strict standards that licensed cannabis products are required to meet. Additionally, non-licensed persons do not pay taxes or licensing fees as required under current law.

On March 2, 2023, the DCC released its enforcement statistics from 2021 and 2022. DCC reported, “DCC-led search warrant operations increased from 62 in 2021 to 155 in 2022, a 150 percent increase. DCC also seized over 41,726 pounds of illegal cannabis in 2021 and more than 144,254 pounds in 2022, a 246 percent increase. Arrests more than tripled, with 17 in 2021 and 56 in 2022. And DCC led operations that seized $243,017,836 worth of cannabis last year, a 212 percent increase from the $77,772,936 seized in 2021.”

Licensee are required to abide by strict packaging and labeling requirements specified in statute and further detailed in regulations. Under the provisions of MAUCRSA, the cannabis regulator (which is currently the DCC) was required to promulgate regulations setting standards for the manufacturing, packaging, and labeling of all manufactured cannabis products including the development of a universal symbol to be included on manufactured products. In 2019, AB 1529 (Low, Chapter 830, Statutes of 2019) required a cannabis cartridge or integrated cannabis vaporizer that contains cannabis or a cannabis product to bear the universal cannabis symbol established through regulations. 4, CCR § 17410 requires the following graphic symbol to be featured on the packaging of various cannabis products, including cannabis seeds, edibles, vape cartridges and integrated vaporizers, and non-manufactured cannabis goods:

The universal symbol is required to be “black or white in color” and conspicuous by printing the symbol on a contrasting color.” The symbol must be at least one-half inch, except in the case of cannabis vape cartridges or integrated cannabis vaporizers, where it must be no smaller than one-quarter inch. The regulations prohibit the symbol from being altered or cropped in any way other than to adjust the sizing for placement on the primary panel.

The DCC is authorized to issue a citation to licensed or unlicensed individuals for any act or omission that violates MAUCRSA or promulgated regulations. Per BPC § 26031.5, the DCC can issue a citation for up to $30,000 per violation by an unlicensed person. Although the DCC would likely be able to take action against an individual for selling a product that appears to bear a symbol or represent itself as a licensed product, if not licensed, it is not explicitly specified in statute. This bill makes it clear that using the universal symbol, established through regulations, for unlicensed cannabis activity is subject to a penalty. Additionally, this bill specifies that each individual package, label, advertisement or other document or object of any kind bearing that universal symbol in violation of MAUCRSA will constitute a separate violation. This bill requires a person who uses or possesses the universal symbol in connection with commercial activity to maintain records to demonstrate that use of the symbol is in connection with commercial cannabis activity and to produce those records upon the demand of a peace officer, a DCC employee or a CDTFA employee. If a package, label, advertisement or other document or object of any kind that bears the universal symbol in violation of the above requirements, this bill makes those items contraband and subject to seizure, as specified.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 8/30/23)

OPPOSITION: (Verified 8/30/23)

None received

ARGUMENTS IN SUPPORT: Supporters note that this bill will help support the legal cannabis market and protect consumers from illegal cannabis businesses.

ASSEMBLY FLOOR: 79-0, 4/17/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner Horvath, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Haney

Prepared by: Elissa Silva / B., P. & E.D. / 916-651-4104

8/31/23 10:26:03

**** END ****

 THIRD READING  

Bill No: AB 1126

Author: Lackey (R)

Amended: 7/13/23 in Senate

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 13-0, 7/10/23

AYES: Roth, Nguyen, Alvarado-Gil, Archuleta, Ashby, Becker, Dodd, Eggman, Glazer, Niello, Smallwood-Cuevas, Wahab, Wilk

ASSEMBLY FLOOR: 79-0, 4/17/23 (Consent) - See last page for vote

SUBJECT: Cannabis: citation and fine

SOURCE: California Cannabis Manufacturers Association

Kiva Confections

DIGEST:

This bill makes it a violation for a person to use or possess the universal symbol for cannabis in connection with commercial activity, other than licensed commercial cannabis activity.

ANALYSIS:

Existing law:

1. Establishes the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and adult-use cannabis. (Business and Professions Code (BPC) § 26000)
   
2. Establishes the Department of Cannabis Control (DCC) to administer and regulate provisions of MAUCRSA. (BPC § 26010)
   
3. Prohibits a person from engaging in commercial cannabis activity without a state license issued by the DCC, as specified. (BPC § 26037.5)
   
4. Requires all cannabis and cannabis products labels and inserts to include the following information displayed in clear and legible in accordance with requirements, including font size, prescribed by the DCC. Requires the following statements must also be in bold print:

“GOVERNMENT WARNING: THIS PACKAGE CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.” (BPC § 26120 (c)(1)(A))

1. Requires the following statement in bold print for cannabis products:

“GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.” (BPC § 26120(c)(1)B))

1. Requires a cannabis cartridge or intergraded cannabis vaporizer that contains cannabis or a cannabis product to bear the universal symbol, which must be visible on the cannabis cartridge or vaporizer and not be smaller than one-quarter of an inch high and must be engraved, affixed with a sticker, or printed in black or white. (BPC § 26122)
   
2. Requires the DCC to promulgate regulations governing the licensing of cannabis manufacturers and standards for the manufacturing, packaging, and labeling of all manufactured cannabis products, as specified, and requires all edible cannabis products be marked with a universal symbol as determined by the DCC through regulation. (BPC § 26130(a)(c))

Existing state regulations:

1. Establishes the universal symbol pursuant to 7) above, and specifies the following:
   
2. The symbol is black or white in color and made conspicuous by printing the symbol on a contrasting color.
3. The symbol is no smaller in height than one-half inch except as allowed under d) below.
4. A cannabis vape cartridge or integrated cannabis vaporizer shall bear a universal symbol in a size no smaller than one-quarter (0.25) inch wide by one-quarter (0.25) inch high that is engraved, printed, or affixed with a sticker.
5. The symbol cannot be altered or cropped in any way other than to adjust the sizing for placement on the primary panel. (Title 4, California Code of Regulations (CCR), § 17410)

This bill:

1. Makes it a violation for a person to use or possess the universal symbol in connection with commercial activity other than commercial cannabis activity licensed under MAUCRSA, as specified.
   
2. States that use or possession of the universal symbol in connection with commercial activity includes, but is not limited to, possession of any package, label, or advertisement of any kind bearing the universal symbol, whether or not that package, label, or advertisement is affixed to, or otherwise associated with, cannabis or cannabis products.
   
3. Makes each individual package, label, advertisement, or other document or object of any kind bearing the universal symbol in violation of 1) above constitutes a separate violation.
   
4. Specifies that 1) above does not prohibit the educational, informational, or other noncommercial use or possession of the universal symbol.

Background

Cannabis Regulatory Background. Beginning in 2018, Prop 64 permitted adults 21 years of age or older to legally grow, possess, and use cannabis for nonmedical purposes, with certain restrictions. Additionally, in 2018, because of Prop 64 and as codified in MAUCRSA, the state implemented a cannabis cultivation and excise tax, which imposes a weight-based tax on production of cannabis and a 15% tax on those who purchase cannabis or cannabis products that are sold in the state.

In 2021, DCC was formally established with both licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicants, licensees, and local governments. The ultimate goal was to simplify and centralize state regulatory efforts; improve coordination, including enforcement; reduce barriers to participation in the legal market; and incentivize greater local participation.

Under current law, a separate license is required for every corner of the cannabis market, which includes growing cannabis, transporting cannabis, making cannabis products, testing cannabis products, selling cannabis, and holding an event where cannabis is sold. Each license type is distinct and must be approved before operating. As specified in BPC § 26050, there are currently 20 license types, including 14 different cultivation license, 2 manufacturers, and one each testing laboratory, retailer, distributor, and microbusiness. In order to obtain a state license, the applicant must obtain approval from its local jurisdiction.

There continues to be growing problems reported within the legal cannabis market; one of which is the illegal cannabis market-those products that are not grown, cultivated, tested, distributed, processed, manufactured, or sold at retail under the same strict standards that licensed cannabis products are required to meet. Additionally, non-licensed persons do not pay taxes or licensing fees as required under current law.

On March 2, 2023, the DCC released its enforcement statistics from 2021 and 2022. DCC reported, “DCC-led search warrant operations increased from 62 in 2021 to 155 in 2022, a 150 percent increase. DCC also seized over 41,726 pounds of illegal cannabis in 2021 and more than 144,254 pounds in 2022, a 246 percent increase. Arrests more than tripled, with 17 in 2021 and 56 in 2022. And DCC led operations that seized $243,017,836 worth of cannabis last year, a 212 percent increase from the $77,772,936 seized in 2021.”

Licensee are required to abide by strict packaging and labeling requirements specified in statute and further detailed in regulations. Under the provisions of MAUCRSA, the cannabis regulator (which is currently the DCC) was required to promulgate regulations setting standards for the manufacturing, packaging, and labeling of all manufactured cannabis products including the development of a universal symbol to be included on manufactured products. In 2019, AB 1529 (Low, Chapter 830, Statutes of 2019) required a cannabis cartridge or integrated cannabis vaporizer that contains cannabis or a cannabis product to bear the universal cannabis symbol established through regulations. 4, CCR § 17410 requires the following graphic symbol to be featured on the packaging of various cannabis products, including cannabis seeds, edibles, vape cartridges and integrated vaporizers, and non-manufactured cannabis goods:

The universal symbol is required to be “black or white in color” and conspicuous by printing the symbol on a contrasting color.” The symbol must be at least one-half inch, except in the case of cannabis vape cartridges or integrated cannabis vaporizers, where it must be no smaller than one-quarter inch. The regulations prohibit the symbol from being altered or cropped in any way other than to adjust the sizing for placement on the primary panel.

The DCC is authorized to issue a citation to licensed or unlicensed individuals for any act or omission that violates MAUCRSA or promulgated regulations. Per BPC § 26031.5, the DCC can issue a citation for up to $30,000 per violation by an unlicensed person. Although the DCC would likely be able to take action against an individual for selling a product that appears to bear a symbol or represent itself as a licensed product, if not licensed, it is not explicitly specified in statute. This bill makes it clear that using the universal symbol, established through regulations, for unlicensed cannabis activity is subject to a penalty. Additionally, this bill specifies that each individual package, label, advertisement or other document or object of any kind bearing that universal symbol in violation of MAUCRSA will constitute a separate violation.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 7/25/23)

California Cannabis Manufacturers Association (co-source)

Kiva Confections (co-source)

OPPOSITION: (Verified 7/25/23)

None received

ARGUMENTS IN SUPPORT: California Cannabis Manufacturers Association and Kiva Confections write in support, “AB 1126 would enact necessary improvements to the Department of Cannabis Control; the bill would allow the DCC to issue citations to parties participating in the sale of unlicensed cannabis through the use of false licensing or unlicensed use of the cannabis universal symbol.”

ASSEMBLY FLOOR: 79-0, 4/17/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner Horvath, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO VOTE RECORDED: Haney

Prepared by: Elissa Silva / B., P. & E.D. / 916-651-4104

8/7/23 13:32:16

**** END ****

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Richard Roth, Chair

2023 - 2024 Regular

Bill No: Hearing Date: July 10, 2023

Subject:

SUMMARY:

Authorizes the Department of Cannabis Control (DCC) to issue a citation for claiming or representing a product as “licensed cannabis” without a license, including the use of the cannabis universal symbol.

Existing law:

1. Establishes the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to regulate the cultivation, distribution, transport, storage, manufacturing, processing, and sale of both medicinal cannabis and adult-use cannabis. (Business and Professions Code (BPC) § 26000)
   
2. Establishes the Department of Cannabis Control (DCC) to administer and regulate provisions of MAUCRSA. (BPC § 26010)
   
3. Prohibits a person from engaging in commercial cannabis activity without a state license issued by the DCC, as specified. (BPC § 26037.5)
   
4. Requires the DCC to make and prescribe reasonable rules and regulations as may be necessary to implement, administer, and enforce its duties, which must be consistent with the purpose and intent of the Control, Regulate and Tax Adult Use of Marijuana Act. (BPC § 26013)
   
5. Requires all cannabis or cannabis products purchased by a customer to be placed in an opaque package prior to leaving a licensed retail premises. (BPC § 26070.1)
6. Requires cannabis and cannabis products to be labeled placed in a tamper-evident, child-resistant and package unique identifier for the purposes of identifying and tracking prior to delivery or sale at a retailer. Requires package must be re-sealable if the product contains more than one serving. (BPC § 26120(a))
7. Prohibits packages and labels from being attractive to children. (BPC § 26120(b))
   
8. Requires all cannabis and cannabis products labels and inserts to include the following information displayed in clear and legible in accordance with requirements, including font size, prescribed by the DCC. Requires the following statements must also be in bold print:

“GOVERNMENT WARNING: THIS PACKAGE CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.” (BPC § 26120 (c)(1)(A))

1. Requires the following statement in bold print for cannabis products:

“GOVERNMENT WARNING: THIS PRODUCT CONTAINS CANNABIS, A SCHEDULE I CONTROLLED SUBSTANCE. KEEP OUT OF REACH OF CHILDREN AND ANIMALS. CANNABIS PRODUCTS MAY ONLY BE POSSESSED OR CONSUMED BY PERSONS 21 YEARS OF AGE OR OLDER UNLESS THE PERSON IS A QUALIFIED PATIENT. THE INTOXICATING EFFECTS OF CANNABIS PRODUCTS MAY BE DELAYED UP TO TWO HOURS. CANNABIS USE WHILE PREGNANT OR BREASTFEEDING MAY BE HARMFUL. CONSUMPTION OF CANNABIS PRODUCTS IMPAIRS YOUR ABILITY TO DRIVE AND OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.” (BPC § 26120(c)(1)B))

1. Prohibits the package and label of a cannabis cartridge and an integrated cannabis vaporizer from indicating that the cartridge or vaporizer is disposable nor imply that it may be thrown in the trash or recycling streams as part of the packaging and labeling requirements beginning January July 1, 2024. (BPC 26120(f))
   
2. Requires a cannabis cartridge or intergraded cannabis vaporizer that contains cannabis or a cannabis product to bear the universal symbol, which must be visible on the cannabis cartridge or vaporizer and not be smaller than one-quarter of an inch high and must be engraved, affixed with a sticker, or printed in black or white. (BPC § 26122)

Existing Regulations:

1. Establishes the universal symbol pursuant to 11) above, and specifies the following:
   
2. The symbol is black or white in color and made conspicuous by printing the symbol on a contrasting color.
3. The symbol is no smaller in height than one-half inch except as allowed under d) below.
4. A cannabis vape cartridge or integrated cannabis vaporizer shall bear a universal symbol in a size no smaller than one-quarter (0.25) inch wide by one-quarter (0.25) inch high that is engraved, printed, or affixed with a sticker.
5. The symbol cannot be altered or cropped in any way other than to adjust the sizing for placement on the primary panel. (Title 4, California Code of Regulations, § 17410)

This bill:

1. Provides the DCC with express authority to issue a citation for a claim or representation of a product as licensed cannabis without a license.
2. Specifically includes the unlicensed use of the cannabis universal symbol as an example of misrepresenting unlicensed cannabis as being licensed.

FISCAL EFFECT:

This bill is not keyed fiscal by the Legislative Counsel.

COMMENTS:

1. Purpose. The California Cannabis Manufacturers Association and Kiva Confections are the co-sponsors of this bill. According to the author, “Nothing in law prohibits the use of the symbol by non-licensees. As a result, the Attorney General’s advice to seek out the symbol is misleading for consumers because the universal symbol is widely used by non-licensees to legitimize intoxicating hemp products and illicit cannabis products. Indeed, even the AG’s bulletin included examples of packaging emblazoned with the universal symbol while boasting potency levels that far exceed the limits allowed by Medicinal and Adult-Use Cannabis regulation and Safety Act (MAUCRSA).

Empty “cannabis” packages are available for bulk purchase at most local tobacco and smoke shops, Amazon, and Alibaba for pennies per package. In addition to use of the universal symbol, the packages include cannabis warning language, Prop 65 cancer and reproductive warnings, nutritional information, and often includes the website or DBA names of licensed cannabis companies – all of which are designed to lure the consumer into believing the product is safe and legal. The fraudulent use of the universal symbol is clearly intended to gain consumer confidence while placing in serious jeopardy public health and safety.”

1. Background.

Cannabis Regulatory Background. In 1996, California first legalized medicinal cannabis via Proposition 215, also known as the Compassionate Use Act. Proposition 215 protected qualified patients and primary caregivers from prosecution related to the possession and cultivation of cannabis for medicinal purposes. In 2003, the Legislature authorized the formation of medical marijuana cooperatives—nonprofit organizations that cultivate and distribute marijuana for medical uses to their members through dispensaries.

In 2015, Governor Brown signed three bills into law that created a comprehensive state licensing and regulatory framework governing the commercial cultivation, manufacture, retail sale, transport, distribution, delivery, and testing of medical cannabis in California. AB 243 (Wood, Chapter 688, Statutes of 2015), AB 266 (Bonta, Chapter 689, Statutes of 2015), and SB 643 (McGuire, Chapter 719, Statutes of 2015) collectively established the Medical Marijuana Regulation and Safety Act (later renamed to the Medical Cannabis Regulation and Safety Act (MCRSA)), to be administered by a number of state agencies: a Bureau of Cannabis Control (BCC) within the Department of Consumer Affairs (DCA); the California Department of Public Health (CDPH); and the California Department of Food and Agriculture (CDFA).

Shortly following the passage of MCRSA, in November 2016, California voters passed Proposition 64, the “Control, Regulate and Tax Adult Use of Marijuana Act” (Prop 64), which decriminalized and legalized adult-use cannabis. Less than a year later in June 2017, the California State Legislature passed a budget trailer bill, SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017), that integrated MCRSA with Prop 64 to create the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), the current regulatory structure for both medicinal and adult-use cannabis.

Beginning in 2018, Prop 64 permitted adults 21 years of age or older to legally grow, possess, and use cannabis for nonmedical purposes, with certain restrictions. Additionally, in 2018, because of Prop 64 and as codified in MAUCRSA, the state implemented a cannabis cultivation and excise tax, which imposes a weight-based tax on production of cannabis and a 15% tax on those who purchase cannabis or cannabis products that are sold in the state.

In 2021, DCC was formally established with both licensing, regulatory and enforcement authority. DCC was designed to centralize and align critical licensing, compliance and enforcement responsibilities to help build a sustainable and successful legal cannabis market by creating a single point of contact for cannabis applicant, licensees and local governments. The goal was to ultimately simplify and centralize state regulatory efforts; improve coordination, including enforcement; reduce barriers to participation in the legal market; and incentivize greater local participation.

Under current law, a separate license is required for every corner of the cannabis market, which includes growing cannabis, transporting cannabis, making cannabis products, testing cannabis products, selling cannabis, and holding an event where cannabis is sold. Each license type is distinct and must be approved before operating. As specified in BPC § 26050, there are currently 20 license types, including 14 different cultivation license, 2 manufacturers, and one each testing laboratory, retailer, distributor, and microbusiness. In order to obtain a state license, the applicant must obtain approval from its local jurisdiction.

There continues to be growing problems reported within the legal cannabis market; one of which is the illegal cannabis market-those products that are not grown, cultivated, tested, distributed, processed, manufactured, or sold at retail under the same strict standards that licensed cannabis products are required to meet. Additionally, non-licensed persons do not pay taxes or licensing fees as required under current law.

On March 2, 2023, the DCC released its enforcement statistics from 2021 and 2022. DCC reported, “DCC-led search warrant operations increased from 62 in 2021 to 155 in 2022, a 150 percent increase. DCC also seized over 41,726 pounds of illegal cannabis in 2021 and more than 144,254 pounds in 2022, a 246 percent increase. Arrests more than tripled, with 17 in 2021 and 56 in 2022. And DCC led operations that seized $243,017,836 worth of cannabis last year, a 212 percent increase from the $77,772,936 seized in 2021.”

Licensee are required to abide by strict packaging and labeling requirements specified in statute and further detailed in regulations. Under the provisions of MAUCRSA, the cannabis regulator was required to promulgate regulations setting standards for the manufacturing, packaging, and labeling of all manufactured cannabis products including the development of a universal symbol to be included on manufactured products. In 2019, AB 1529 (Low, Chapter 830, Statutes of 2019) required a cannabis cartridge or integrated cannabis vaporizer that contains cannabis or a cannabis product to bear the universal cannabis symbol established through regulations. 4, CCR § 17410 requires the following graphic symbol to be featured on the packaging of various cannabis products, including cannabis seeds, edibles, vape cartridges and integrated vaporizers, and non-manufactured cannabis goods:

The universal symbol is required to be “black or white in color” and conspicuous by printing the symbol on a contrasting color.” The symbol must be at least one-half inch, except in the case of cannabis vape cartridges or integrated cannabis vaporizers, where it must be no smaller than one-quarter inch. The regulations prohibit the symbol from being altered or cropped in any way other than to adjust the sizing for placement on the primary panel.

The DCC is authorized to issue a citation to licensed or unlicensed individuals for any act or omission that violates MACURSA or promulgated regulations. Per BPC § 26031.5, the DCC can issue a citation for up to $30,000 per violation by an unlicensed person. Although the DCC would likely be able to take action against an individual for selling a product that appears to bear a symbol or represent itself as a licensed product, it is not explicitly specified in statute. This bill would add that specific authorization.

1. Arguments in Support. California Cannabis Manufacturers Association and Kiva Confections writes in support, “AB 1126 would enact necessary improvements to the Department of Cannabis Control; the bill would allow the DCC to issue citations to parties participating in the sale of unlicensed cannabis through the use of false licensing or unlicensed use of the cannabis universal symbol.”
2. Policy Considerations and Suggested Author’s Amendment. As currently drafted, this bill would authorize the DCC to take an action against an individual who represents a product as “licensed cannabis” when it in fact is not, and includes the unlicensed use of the “cannabis universal symbol”. There is no reference to the cannabis universal symbol in the law and the only reference to a universal symbol in statute authorized regulations governing the labeling of all manufactured cannabis products, including determining a “universal symbol” to be used to mark all edible cannabis products. That symbol was likely intended more to alert a consumer to the product inside, as opposed to being a mechanism to determine whether or not the product is from a licensed retailer. To clarify the author’s intent and to provide additional enforcement authority against illicit actors who try to make an illegal product package appear as if it was created in the licensed cannabis market, the author should amend the bill as follows:

26031.6.

(a) It shall be a violation of this division for any person to use or possess the universal symbol described in paragraph (7) of subdivision (c) of Section 26130 in connection with commercial activity other than commercial cannabis activity licensed under this division. For purposes of this section, use or possession of the universal symbol in connection with commercial activity includes, but is not limited to, possession of any package, label, or advertisement of any kind bearing the universal symbol, whether or not that package, label, or advertisement is affixed to, or otherwise associated with, cannabis or cannabis products.

(b) Each individual package, label, advertisement, or other document or object of any kind bearing the universal symbol in violation of this section shall constitute a separate violation of this section.

(c) This section does not prohibit the educational, informational, or other non-commercial use or possession of the universal symbol.

Additionally, in order for the provisions of this bill to be enforced, it is vital to ensure that the appropriate regulators have the resources and the necessary statutory authority. To that end, the author should continue working with the DCC and other stakeholders to determine if the DCC or any of its partners need additional enforcement authority to be able to address unlicensed products or materials, which carry and use the universal symbol in an effort to undermine the legal market and deceive consumers. .

SUPPORT AND OPPOSITION:

Support:

California Cannabis Manufacturers Association (co-sponsor)
Kiva Confections (co-sponsor)

Opposition:

-- END --

Date of Hearing: April 11, 2023

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Marc Berman, Chair

ABPCA Bill Id:AB 1126

Author:(Lackey) – As Introduced Ver:February 15, 2023

SUBJECT: Cannabis: citation and fine.

SUMMARY: Specifically authorizes the Department of Cannabis Control (Department) to issue a citation for misrepresenting unlicensed cannabis products as being licensed, including through the unlicensed use of the cannabis universal symbol.

EXISTING LAW:

1. Enacts the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to provide for a comprehensive regulatory framework for the cultivation, distribution, transport, storage, manufacturing, processing, and sale of medicinal and adult-use cannabis. (Business and Professions Code (BPC) §§ 26000 et seq.)
2. Establishes the Department within the Business, Consumer Services, and Housing Agency (previously established as the Bureau of Cannabis Control, the Bureau of Marijuana Control, the Bureau of Medical Cannabis Regulation, and the Bureau of Medical Marijuana Regulation), for purposes of administering and enforcing MAUCRSA. (BPC § 26010)
3. Provides for twenty total types of cannabis licenses including subtypes for cultivation, manufacturing, testing, retail, distribution, and microbusiness; requires each licensee except for testing laboratories to clearly designate whether their license is for adult-use or medicinal cannabis. (BPC § 26050)
4. Requires the Department to convene an advisory committee to advise state licensing authorities on the development of standards and regulations for legal cannabis. (BPC § 26014)
5. Establishes grounds for disciplinary action against cannabis licensees, including failures to comply with MAUCRSA as well as local laws and ordinances. (BPC § 26030)
6. Authorizes the Department to issue a citation to a licensee or unlicensed person for violating MAUCRSA or regulations adopted pursuant to MAUCRSA, and allows the Department to assess an administrative fine of up to $5,000 per violation by a licensee and up to $30,000 per violation by an unlicensed person. (BPC § 26031.5)
7. Prohibits cannabis and cannabis product packages and labels from being made to be attractive to children. (BPC § 26120)
8. Requires a cannabis cartridge or integrated cannabis vaporizer to bear a universal symbol that is at least one-quarter inch wide by one-quarter inch high and either engraved, affixed with a sticker, or printed in black or white. (BPC § 26122)
9. Requires the Department to promulgate regulations setting standards for the manufacturing, packaging, and labeling of all manufactured cannabis products, including a requirement that edible products be marked with a universal symbol. (BPC § 26130)

THIS BILL:

1. Provides the Department with express authority to issue a citation for a claim or representation of a product as licensed cannabis without a license.
2. Specifically includes the unlicensed use of the cannabis universal symbol as an example of misrepresenting unlicensed cannabis as being licensed.

FISCAL EFFECT: This bill is keyed nonfiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is co-sponsored by the California Cannabis Manufacturers Association and Kiva Confections. According to the author:

“While state law requires cannabis licensees to use the universal symbol on all packaging, nothing in law prohibits the use of the symbol by non-licensees. As a result, the universal symbol is widely used by non-licensees to legitimize intoxicating hemp products and illicit cannabis products with potency levels that far exceed the limits set allowed by the limits allowed by Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). In fact, empty “cannabis” packages are available for bulk purchase at most local tobacco and smoke shops and online for pennies per package specifically designed to fooling the consumer into believing the product placed inside is safe and legal. This bill makes fraudulent use of the universal symbol a crime and seeks to enhance consumer confidence in legal cannabis products.”

Background.

Brief History of Cannabis Regulation in California. Consumption of cannabis was first made lawful in California in 1996 when voters approved Proposition 215, or the Compassionate Use Act. Proposition 215 protected qualified patients and caregivers from prosecution relating to the possession and cultivation of cannabis for medicinal purposes, if recommended by a physician. This regulatory scheme was further refined by SB 420 (Vasconcellos) in 2003, which established the state’s Medical Marijuana Program. After several years of lawful cannabis cultivation and consumption under state law, a lack of a uniform regulatory framework led to persistent problems across the state. Cannabis’s continued illegality under the federal Controlled Substances Act, which classifies cannabis as a Schedule I drug ineligible for prescription, generated periodic enforcement activities by the United States Department of Justice. Threat of action by the federal government created apprehension within California’s cannabis community.

After several prior attempts to improve the state’s regulation of cannabis, the Legislature passed the Medical Marijuana Regulation and Safety Act—subsequently retitled the Medical Cannabis Regulation and Safety Act (MCRSA)—in 2015. MCRSA established, for the first time, a comprehensive statewide licensing and regulatory framework for the cultivation, manufacture, transportation, testing, distribution, and sale of medicinal cannabis. While entrusting state agencies to promulgate extensive regulations governing the implementation of the state’s cannabis laws, MCRSA fully preserved local control. Under MCRSA, local governments may establish their own ordinances to regulate medicinal cannabis activity. Local jurisdictions could also choose to ban cannabis establishments altogether.

Not long after the Legislature enacted MCRSA, California voters passed Proposition 64, the Adult Use of Marijuana Act (AUMA). The passage of the AUMA legalized cannabis for non-medicinal adult use in a private home or licensed business; allowed adults 21 and over to possess and give away up to approximately one ounce of cannabis and up to eight grams of concentrate; and permitted the personal cultivation of up to six plants. The proponents of the AUMA sought to make use of much of the regulatory framework and authorities set out by MCRSA while making a few notable changes to the structure still being implemented.

In the spring of 2017, SB 94 (Committee on Budget and Fiscal Review) was passed to reconcile the distinct systems for the regulation, licensing, and enforcement of legal cannabis that had been established under the respective authorities of MCRSA and the AUMA. The single consolidated system established by the bill—known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA)—created a unified series of cannabis laws. On January 16, 2019, the state’s three cannabis licensing authorities—the Bureau of Cannabis Control, the California Department of Food and Agriculture, and the California Department of Public Health—officially announced that the Office of Administrative Law had approved final cannabis regulations promulgated by the three agencies respectively.

In early 2021, the Department of Finance released trailer bill language to create a new Department with centralized authority for cannabis licensing and enforcement activities. This new department was created through a consolidation of the three prior licensing authorities’ cannabis programs. As of July 1, 2021, the Department has been the single entity responsible for administering and enforcing the majority of MAUCRSA. New regulations went into effect on January 1, 2023 to effectuate the consolidation and make other changes to cannabis regulation.

Enforcement Against Unlicensed Activity. A report published by the Reason Foundation estimates that as much as two-thirds of cannabis sales in California take place on the black market. This is consistent with widespread consensus that illicit cannabis continues to proliferate notwithstanding the enactment of MAUCRSA. In addition to unlicensed persons engaging in unlawful cannabis activity, there have also been cases where licensed cannabis businesses run a “back door” operation of illicit cannabis commerce in addition to their licensed activity.

Because unlicensed cannabis products do not receive state oversight and enforcement of various health and safety requirements, including laboratory testing, consumption of unlicensed cannabis products can pose a significant risk to consumers. In August 2019, the number of emergency department visits related to cannabis vaping products sharply increased, with a total of 2,807 hospitalized cases or deaths reported to federal Centers for Disease Control and Prevention in the United States. It is believed that much of this “vaping crisis” was the result of untested, unlicensed manufactured cannabis products.

Enforcement against the black market has attracted significant legislative attention, particularly within the California State Assembly. A task force was recently established through the 2022-23 Budget process to promote communication between state and local entities engaged in the regulation of commercial cannabis activity and facilitate cooperation to enforce applicable state and local laws. Existing law authorizes the Department to take enforcement action for violations of MAUCRSA. The Department can issue a citation to either a licensee or an unlicensed person, which can include an order of abatement and a fine of up to $5,000 for licensees and $30,000 for unlicensed individuals. This authority allows the Department to issue a citation to licensees who sell cannabis products that do not comply with MAUCRSA, or to black market operators.

However, statute does not specifically state that falsely claiming or representing unlicensed cannabis as being licensed is an enforceable violation of MAUCRSA and its implementing regulations. The author and sponsors of this bill contend that this is an issue as some consumers may unknowingly consume unlicensed products without realizing that they have not met the state’s regulatory requirements. Examples have been provided of illicit cannabis products that appear from their packaging to be licensed, including by featuring the universal symbol.

MAUCRSA requires the Department to promulgate regulations setting standards for the manufacturing, packaging, and labeling of all manufactured cannabis products, including a requirement that products be provided to customers with sufficient information to enable the informed consumption of the product, including the potential effects of the cannabis product and directions as to how to consume the cannabis product, as necessary. MAUCRSA also required those regulations to include a universal symbol for all edible products that contain cannabinoids.

Section 17410 of the Department’s current regulations requires the following graphic symbol to be featured on the packaging of various cannabis products, including cannabis seeds, edibles, vape cartridges and integrated vaporizers, and nonmanufactured cannabis goods:

The universal symbol is required to be “black or white in color” and “shall be made conspicuous by printing the symbol on a contrasting color.” The symbol must be at least one-half inch, except in the case of cannabis vape cartridges or integrated cannabis vaporizers, where it must be no smaller than one-quarter inch. The regulations prohibit the symbol from being altered or cropped in any way other than to adjust the sizing for placement on the primary panel.

The author and sponsors of this bill believe that featuring the universal symbol on an illicitly manufactured cannabis product actively deceives cannabis consumers into believing they are purchasing safe, legal, tested products. While selling cannabis products without a license or without otherwise complying with MAUCRSA is already illegal, the author believes there should be specific penalties for this type of deceptive behavior. This bill would generally authorized the Department to issue a citation for any false claim or representation that a product is licensed without a license, and would specifically provide that unlicensed use of the universal symbol is cause for that citation.

Current Related Legislation. AB 1448 (Wallis) authorizes a local jurisdiction to establish administrative penalties for violations of local law relating to commercial cannabis activity. This bill is pending in this committee.

AB 1171 (Blanca Rubio) authorizes a person licensed under MAUCRSA to bring an action in superior court against a person engaging in commercial cannabis activity without a license. This bill is pending in this committee.

Prior Related Legislation. AB 1417 (B. Rubio) would have established civil penalties for violating specified cannabis marketing or advertising requirements, and would have specified disbursement procedures for civil penalties. This bill was held under submission on the Senate Appropriations Committee’s suspense file.

AB 2899 (B. Rubio, Chapter 923, Statutes of 2018) prohibited a licensee from publishing or disseminating advertisements or marketing of cannabis and cannabis products while the licensee’s license is suspended.

SB 94 (Committee on Budget and Fiscal Review, Chapter 27, Statutes of 2017) combined AUMA and MCRSA into a unified system for the regulation of cannabis, resulting in MAUCRSA.

ARGUMENTS IN SUPPORT:

The California Cannabis Manufacturers Association and Kiva Confections are co-sponsoring this bill, each writing: “AB 1126 would enact necessary improvements to the Department of Cannabis Control; the bill would allow the DCC to issue citations to parties participating in the sale of unlicensed cannabis through the use of false licensing or unlicensed use of the cannabis universal symbol. This legislation would provide critical support to the growing legal market and help to protect consumers from unlicensed businesses. The culture around the legal cannabis industry recognizes the necessity of legislation such as AB 1126, as to protect consumers and put money back into the regulated market.”

ARGUMENTS IN OPPOSITION:

None on file.

POLICY ISSUE(S) FOR CONSIDERATION:

While the author and sponsors have characterized the cannabis universal symbol as representing that a product is licensed and tested pursuant to California law, it is not clear that this is how it was intended to be interpreted. Prior to the enactment of Proposition 64, the California Department of Public Health was required to create labeling requirements specifically for edible products containing cannabis. It is arguable that this requirement was first instituted not to provide a stamp of approval, but to warn consumers that a brownie, cookie, or other edible product contained tetrahydrocannabinol (THC). While the Department’s regulations require a multitude of cannabis products to be marked with the universal symbol, and it is required for products containing any cannabinoids (including non-psychoactive cannabinoids such as CBD), the author may wish to consider the implications of prohibiting illicit operators from warning consumers that a product is potentially psychoactive.

REGISTERED SUPPORT:

California Cannabis Manufacturers Association (Co-Sponsor)

Kiva Confections (Co-Sponsor)

California Cannabis Industry Association

REGISTERED OPPOSITION:

None on file.

Analysis Prepared by: Robert Sumner / B. & P. / (916) 319-3301