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. Existing law, 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 establishes the Department of Cannabis Control (department) within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director. Existing law provides that a local jurisdiction may allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a retailer or microbusiness licensed under this division if certain conditions are met. Existing administrative law specifies that a licensed retailer or licensed microbusiness authorized for retail sales who operates a consumption area on the licensed premises in accordance with this provision may also sell prepackaged, noncannabis-infused, nonalcoholic food and beverages if the applicable local jurisdiction allows.

This bill would authorize a local jurisdiction, if specified conditions are met, to allow for the preparation or sale of noncannabis food or beverage products, as specified, by a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed, to allow for the sale of prepackaged, noncannabis-infused, nonalcoholic food and beverages by a licensed retailer, and to allow, and to sell tickets for, live musical or other performances on the premises of a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed. The bill would additionally specify that these provisions do not authorize a licensed retailer or microbusiness to prepare or sell industrial hemp or products containing industrial hemp, as provided.

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. Existing law, 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 establishes the Department of Cannabis Control (department) within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director. Existing law provides that a local jurisdiction may allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a retailer or microbusiness licensed under this division if certain conditions are met. Existing administrative law specifies that a licensed retailer or licensed microbusiness authorized for retail sales who operates a consumption area on the licensed premises in accordance with this provision may also sell prepackaged, noncannabis-infused, nonalcoholic food and beverages if the applicable local jurisdiction allows.

This bill would authorize a local jurisdiction, if specified conditions are met, to allow for the preparation or sale of noncannabis food or beverage products, as specified, by a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed, to allow for the sale of prepackaged, noncannabis-infused, nonalcoholic food and beverages by a licensed retailer, and to allow, and to sell tickets for, live musical or other performances on the premises of a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed. The bill would additionally specify that these provisions do not authorize a licensed retailer or microbusiness to prepare or sell industrial hemp or products containing industrial hemp, as provided.

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. Existing law, 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 establishes the Department of Cannabis Control (department) within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director. Existing law provides that a local jurisdiction may allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a retailer or microbusiness licensed under this division if certain conditions are met. Existing administrative law specifies that a licensed retailer or licensed microbusiness authorized for retail sales who operates a consumption area on the licensed premises in accordance with this provision may also sell prepackaged, noncannabis-infused, nonalcoholic food and beverages if the applicable local jurisdiction allows.

This bill would specify that a local jurisdiction exercising the authority described above may allow the retailer or microbusiness to sell noncannabis food and beverage products other than alcoholic beverages authorize a local jurisdiction, if specified conditions are met, to allow for the preparation or sale of noncannabis food or beverage products, as specified, by a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed, to allow for the sale of prepackaged, noncannabis-infused, nonalcoholic food and beverages by a licensed retailer, and to allow, and to sell tickets for, live musical or other performances on the premises in addition to smoking, vaporizing, and ingesting of cannabis or cannabis products. of a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed.

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. Existing law, 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 establishes the Department of Cannabis Control (department) within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director. Existing law provides that a local jurisdiction may allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a retailer or microbusiness licensed under this division if certain conditions are met.

This bill would specify that a local jurisdiction exercising the authority described above may allow the retailer or microbusiness to sell noncannabis food and beverage products and allowing, and selling other than alcoholic beverages and to allow, and to sell tickets for, live musical or other performances on the premises in addition to smoking, vaporizing, and ingesting of cannabis or cannabis products.

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. Existing law, 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 establishes the Department of Cannabis Control (department) within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director. Existing law provides that a local jurisdiction may allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a retailer or microbusiness licensed under this division if certain conditions are met.

This bill would specify that a local jurisdiction exercising the authority described above may allow the retailer or microbusiness to conduct business activities sell noncannabis food and beverage products and allowing, and selling tickets for, live musical or other performances on the premises other than the in addition to smoking, vaporizing, and ingesting of cannabis or cannabis products, including, but not limited to, selling non-cannabis-infused food, selling nonalcoholic beverages, and allowing, and selling tickets for, live musical or other performances. products.

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. Existing law, 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 establishes the Department of Cannabis Control (department) within the Business, Consumer Services, and Housing Agency to administer the act, and requires the department to be under the supervision and control of a director. Existing law provides that a local jurisdiction may allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a retailer or microbusiness licensed under this division if certain conditions are met.

This bill would specify that a local jurisdiction exercising the authority described above may allow the retailer or microbusiness to conduct business activities on the premises other than the smoking, vaporizing, and ingesting of cannabis or cannabis products, including, but not limited to, selling non-cannabis-infused food, selling nonalcoholic beverages, and allowing, and selling tickets for, live musical or other performances.

GOVERNOR'S VETO

GV Bill Id:AB 374

Author:(Haney)

As Enrolled Ver:September 12, 2023

2/3 vote

SUMMARY

Authorizes local jurisdictions to allow cannabis retailers to prepare and serve non-cannabis food and beverages, and to hold and sell tickets to live musical or other performances, in the area of the premises where consumption of cannabis and cannabis goods is authorized.

Senate Amendments

1. Clarify that cannabis retailers cannot prepare or sell hemp products under the bill.
2. Prohibit a retailer from engaging in activities authorized by the bill if their license is suspended.
3. Require all noncannabis food and beverages present on the premises of a retailer to be stored and displayed separately and distinctly from all cannabis and cannabis products present on the premises.

Governor's Veto Message

This bill would allow local jurisdictions to permit certain cannabis retailers to prepare and sell food or drinks that do not contain cannabis, as well as host and sell tickets to live events at their licensed premises.

I appreciate the author's intent to provide cannabis retailers with increased business opportunities and an avenue to attract new customers. However, I am concerned this bill could undermine California's long-standing smoke-free workplace protections.

Protecting the health and safety of workers is paramount. I encourage the author to address this concern in subsequent legislation.

COMMENTS

Cannabis Consumption Lounges. The author states that the intent of this bill is to allow for cannabis retailers to engage in a business model analogous to establishments found in Amsterdam. While cannabis is officially a controlled substance in the Netherlands and both possession and cultivation of the plant is a crime, the country has long applied what is referred to as gedoogbeleid – a policy of tolerance. The Dutch Ministry of Justice has consistently tolerated possession of up to five grams of cannabis for personal and cultivation of up to five plants. This policy effectively decriminalizes recreational consumption of cannabis, though possession or cultivation beyond personal use is still subject to criminal penalties.

As a result of the country's tolerance policy, there has been a proliferation of so-called "coffeeshops" in cities such as Amsterdam where cannabis may be sold and consumed. While there is no formally lawful way for these establishments to purchase bulk cannabis for resale, consumers may safely purchase and consume cannabis within the personal use limits on the premises. According to the author, these establishments often serve as social hubs where live music may be performed, and food and beverages not containing cannabis are available for purchase and consumption.

There are restrictions on the Amsterdam model. Dutch law has long prohibited the sale and consumption of alcohol in coffeeshops, and a national tobacco smoking ban applies to activities within those establishments. Since 2008, Dutch law has prohibited coffeeshops from being operated within 250m of schools. In an effort to combat concerns of "drug tourism," the Dutch government announced in 2011 that tourists were to be banned from patronizing coffeeshops.

The coffeeshop establishment model is arguably only partially allowable under California law. MAUCRSA prohibits smoking, vaporizing, or ingesting cannabis or cannabis products in any public place. However, Proposition 64 authorized local jurisdictions to allow for cannabis or to be consumed on the premises of a retailer or microbusiness licensed under certain conditions. This language gave cities and counties the option of locally allowing for the establishment of settings referred to commonly as "consumption lounges" where cannabis use can occur socially.

However, MAUCRSA does not expressly allow for licensees to sell non-cannabis food or beverages within the premises of a consumption lounge. The law also does not speak to the legality of selling tickets to performances held on the premises. However, Section 15407 in regulations adopted by the Department of Cannabis Control (Department) stated: "In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and the branded merchandise of any licensee." This regulation historically prohibited cannabis retailers from selling food or beverages not infused with cannabis, including on the premises of a consumption lounge.

This prohibition would not allow for the type of consumption lounges proposed by the City of West Hollywood, which adopted a Cannabis Ordinance on November 20, 2017. License applicants had previously presented the city with various hospitality-focused business proposals, wherein customers would be allowed to consume cannabis and cannabis products in a "social lounge" setting featuring other food and beverages. One proposal described itself as a "full service restaurant" offering meals "featuring local, organic ingredients with farm-to-table preparation." Under the proposal, these meals could be optionally enhanced "with CBD and THC infused dressings and sauces, natural agave sweeteners, and wellness shots." The City of West Hollywood sponsored multiple bills to preempt the Department's regulations, but these measures did not reach the Governor's desk.

In 2022, the Department revised its regulations to additionally state that cannabis retailers who operate a consumption area to "may also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales." The Department's revised regulations further clarified that nothing in its regulations prevents consumers from "bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities."

The Department's revised regulations created a model wherein non-cannabis food and beverages can be sold and consumed in a consumption lounge. However, the law still doesn't allow cannabis retailers to prepare fresh food or beverages on the premises. The regulations also do not allow for any other types of sales to occur on the premises of a cannabis retailer, including the sale of tickets to live musical performances.

This bill seeks to preempt the Department's regulations and amend MAUCRSA to explicitly allow cannabis retailers to sell non-cannabis-infused food, nonalcoholic beverages, and tickets to live musical or other performances. This allowance would remain within the context of the consumption lounge model, which requires local authorization and approval. The bill would also retain MAUCRSA's prohibition against cannabis retailers selling or serving alcoholic beverages or tobacco products, and access to the consumption lounge area would remain restricted to persons 21 or older and be kept out of sight from the general public. The author believes that by expressly allowing for these sales to occur under MAUCRSA, California can more effectively market consumption lounges as a social venue where consumers can enjoy activities that are more inclusive than simply consuming cannabis.

According to the Author

"California is known worldwide as the birthplace of cannabis culture—but California's small cannabis businesses are struggling. Issues like over-saturation, high taxes, and the thriving black market are hurting cannabis businesses who follow the rules and pay taxes. California's decade of medical marijuana-only policies has led to pharmacy-like cannabis 'dispensaries' that encourages customers to buy cannabis and leave. Other cities, like Amsterdam, are known for their social, community style cannabis cafés. While consuming cannabis on-site is technically legal in California, selling non-cannabis-infused products is not. AB 374 legalizes cannabis cafes by allowing the sale of non-cannabis food and soft drink, allowing small cannabis retailers to diversify their business and move away from the limiting dispensary model."

Arguments in Support

The California Nightlife Association is sponsoring this bill, writing: "Allowing cannabis lounges the commonsense option to sell food and beverage that isn't 'prepackaged' and giving them flexibility to provide entertainment will give a much-needed lifeline to legal cannabis retailers who are struggling mightily to survive in the industry. Additionally, this bill will give our communities new, exciting opportunities to offer arts and entertainment in spaces where it was previously impossible to do so economically."

Arguments in Opposition

The American Cancer Society Cancer Action Network, the American Heart Association, and the American Lung Association write jointly in opposition to this bill, arguing: "This bill could essentially turn a cannabis establishment into a restaurant and potentially force workers to accept exposure to toxic chemicals in order to keep their jobs. Workers should not have to choose between their health and a good job." The letter concludes by stating: "California has fought hard to protect workers and ensure a safe, healthy, smoke free work environment. AB 374 will undo that by re-creating the harmful work environments of the past."

FISCAL COMMENTS

None. This bill is keyed nonfiscal by the Legislative Counsel.

VOTES

ASM BUSINESS AND PROFESSIONS: 15-2-1

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

NO: Dixon, Joe Patterson

ABS, ABST OR NV: Irwin

ASM GOVERNMENTAL ORGANIZATION: 17-4-1

YES: Santiago, Lackey, Aguiar-Curry, Berman, Bryan, Cervantes, Garcia, Gipson, Jones-Sawyer, Low, McCarty, McKinnor, Quirk-Silva, Ramos, Robert Rivas, Blanca Rubio, Villapudua

NO: Megan Dahle, Davies, Mathis, Ta

ABS, ABST OR NV: Jim Patterson

ASSEMBLY FLOOR: 64-9-7

YES: Addis, Aguiar-Curry, Alanis, Alvarez, Bauer-Kahan, Bennett, Berman, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Flora, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Stephanie Nguyen, Ortega, Pacheco, Papan, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Schiavo, Soria, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Wicks, Wilson, Wood, Zbur, Rendon

NO: Megan Dahle, Davies, Dixon, Vince Fong, Mathis, Muratsuchi, Jim Patterson, Sanchez, Ta

ABS, ABST OR NV: Arambula, Bains, Boerner, Essayli, Gallagher, Irwin, Weber

SENATE FLOOR: 34-3-3

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

NO: Jones, Nguyen, Seyarto

ABS, ABST OR NV: Grove, Hurtado, Ochoa Bogh

ASSEMBLY FLOOR: 66-9-5

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

NO: Megan Dahle, Davies, Dixon, Vince Fong, Gallagher, Mathis, Muratsuchi, Sanchez, Ta

ABS, ABST OR NV: Bains, Essayli, Irwin, Jim Patterson, Weber

UPDATED

VERSION: September 12, 2023

CONSULTANT: Robert Sumner / B. & P. / (916) 319-3301 FN: 0002478

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 374

Author:(Haney)

As Amended Ver:August 22, 2023

Majority vote

SUMMARY

Authorizes local jurisdictions to allow cannabis retailers to prepare and serve non-cannabis food and beverages, and to hold and sell tickets to live musical or other performances, in the area of the premises where consumption of cannabis and cannabis goods is authorized.

Senate Amendments

1. Clarify that cannabis retailers cannot prepare or sell hemp products under this bill.
2. Prohibit a retailer from engaging in activities authorized by this bill if their license is suspended.
3. Require all noncannabis food and beverages present on the premises of a retailer to be stored and displayed separately and distinctly from all cannabis and cannabis products present on the premises.

COMMENTS

Cannabis Consumption Lounges. The author states that the intent of this bill is to allow for cannabis retailers to engage in a business model analogous to establishments found in Amsterdam. While cannabis is officially a controlled substance in the Netherlands and both possession and cultivation of the plant is a crime, the country has long applied what is referred to as gedoogbeleid – a policy of tolerance. The Dutch Ministry of Justice has consistently tolerated possession of up to five grams of cannabis for personal and cultivation of up to five plants. This policy effectively decriminalizes recreational consumption of cannabis, though possession or cultivation beyond personal use is still subject to criminal penalties.

As a result of the country's tolerance policy, there has been a proliferation of so-called "coffeeshops" in cities such as Amsterdam where cannabis may be sold and consumed. While there is no formally lawful way for these establishments to purchase bulk cannabis for resale, consumers may safely purchase and consume cannabis within the personal use limits on the premises. According to the author, these establishments often serve as social hubs where live music may be performed, and food and beverages not containing cannabis are available for purchase and consumption.

There are restrictions on the Amsterdam model. Dutch law has long prohibited the sale and consumption of alcohol in coffeeshops, and a national tobacco smoking ban applies to activities within those establishments. Since 2008, Dutch law has prohibited coffeeshops from being operated within 250m of schools. In an effort to combat concerns of "drug tourism," the Dutch government announced in 2011 that tourists were to be banned from patronizing coffeeshops.

The coffeeshop establishment model is arguably only partially allowable under California law. MAUCRSA prohibits smoking, vaporizing, or ingesting cannabis or cannabis products in any public place. However, Proposition 64 authorized local jurisdictions to allow for cannabis or to be consumed on the premises of a retailer or microbusiness licensed under certain conditions. This language gave cities and counties the option of locally allowing for the establishment of settings referred to commonly as "consumption lounges" where cannabis use can occur socially.

However, MAUCRSA does not expressly allow for licensees to sell non-cannabis food or beverages within the premises of a consumption lounge. The law also does not speak to the legality of selling tickets to performances held on the premises. However, Section 15407 in regulations adopted by the Department of Cannabis Control (Department) stated: "In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and the branded merchandise of any licensee." This regulation historically prohibited cannabis retailers from selling food or beverages not infused with cannabis, including on the premises of a consumption lounge.

This prohibition would not allow for the type of consumption lounges proposed by the City of West Hollywood, which adopted a Cannabis Ordinance on November 20, 2017. License applicants had previously presented the city with various hospitality-focused business proposals, wherein customers would be allowed to consume cannabis and cannabis products in a "social lounge" setting featuring other food and beverages. One proposal described itself as a "full service restaurant" offering meals "featuring local, organic ingredients with farm-to-table preparation." Under the proposal, these meals could be optionally enhanced "with CBD and THC infused dressings and sauces, natural agave sweeteners, and wellness shots." The City of West Hollywood sponsored multiple bills to preempt the Department's regulations, but these measures did not reach the Governor's desk.

In 2022, the Department revised its regulations to additionally state that cannabis retailers who operate a consumption area to "may also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales." The Department's revised regulations further clarified that nothing in its regulations prevents consumers from "bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities."

The Department's revised regulations created a model wherein non-cannabis food and beverages can be sold and consumed in a consumption lounge. However, the law still doesn't allow cannabis retailers to prepare fresh food or beverages on the premises. The regulations also do not allow for any other types of sales to occur on the premises of a cannabis retailer, including the sale of tickets to live musical performances.

This bill seeks to preempt the Department's regulations and amend MAUCRSA to explicitly allow cannabis retailers to sell non-cannabis-infused food, nonalcoholic beverages, and tickets to live musical or other performances. This allowance would remain within the context of the consumption lounge model, which requires local authorization and approval. The bill would also retain MAUCRSA's prohibition against cannabis retailers selling or serving alcoholic beverages or tobacco products, and access to the consumption lounge area would remain restricted to persons 21 or older and be kept out of sight from the general public. The author believes that by expressly allowing for these sales to occur under MAUCRSA, California can more effectively market consumption lounges as a social venue where consumers can enjoy activities that are more inclusive than simply consuming cannabis.

According to the Author

"California is known worldwide as the birthplace of cannabis culture – but California's small cannabis businesses are struggling. Issues like over-saturation, high taxes, and the thriving black market are hurting cannabis businesses who follow the rules and pay taxes. California's decade of medical marijuana-only policies has led to pharmacy-like cannabis 'dispensaries' that encourages customers to buy cannabis and leave. Other cities, like Amsterdam, are known for their social, community style cannabis cafés. While consuming cannabis on-site is technically legal in California, selling non-cannabis-infused products is not. AB 374 legalizes cannabis cafes by allowing the sale of non-cannabis food and soft drink, allowing small cannabis retailers to diversify their business and move away from the limiting dispensary model."

Arguments in Support

The California Nightlife Association is sponsoring this bill, writing: "Allowing cannabis lounges the commonsense option to sell food and beverage that isn't 'prepackaged' and giving them flexibility to provide entertainment will give a much-needed lifeline to legal cannabis retailers who are struggling mightily to survive in the industry. Additionally, this bill will give our communities new, exciting opportunities to offer arts and entertainment in spaces where it was previously impossible to do so economically."

Arguments in Opposition

The American Cancer Society Cancer Action Network, the American Heart Association, and the American Lung Association write jointly in opposition to this bill, arguing: "This bill could essentially turn a cannabis establishment into a restaurant and potentially force workers to accept exposure to toxic chemicals in order to keep their jobs. Workers should not have to choose between their health and a good job." The letter concludes by stating: "California has fought hard to protect workers and ensure a safe, healthy, smoke free work environment. AB 374 will undo that by re-creating the harmful work environments of the past."

FISCAL COMMENTS

None. This bill is keyed non-fiscal by the Legislative Counsel.

VOTES:

ASM BUSINESS AND PROFESSIONS: 15-2-1

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

NO: Dixon, Joe Patterson

ABS, ABST OR NV: Irwin

ASM GOVERNMENTAL ORGANIZATION: 17-4-1

YES: Santiago, Lackey, Aguiar-Curry, Berman, Bryan, Cervantes, Garcia, Gipson, Jones‑Sawyer, Low, McCarty, McKinnor, Quirk-Silva, Ramos, Robert Rivas, Blanca Rubio, Villapudua

NO: Megan Dahle, Davies, Mathis, Ta

ABS, ABST OR NV: Jim Patterson

ASSEMBLY FLOOR: 64-9-7

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

NO: Megan Dahle, Davies, Dixon, Vince Fong, Mathis, Muratsuchi, Jim Patterson, Sanchez, Ta

ABS, ABST OR NV: Arambula, Bains, Boerner, Essayli, Gallagher, Irwin, Weber

SENATE FLOOR: 34-3-3

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

NO: Jones, Nguyen, Seyarto

ABS, ABST OR NV: Grove, Hurtado, Ochoa Bogh

UPDATED

VERSION: August 22, 2023

CONSULTANT: Robert Sumner / B. & P. / (916) 319-3301 FN: 0001953

 THIRD READING  

Bill No: AB 374

Author: Haney (D)

Amended: 8/22/23 in Senate

Vote: 21

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 11-1, 6/26/23

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

NOES: Nguyen

NO VOTE RECORDED: Becker

ASSEMBLY FLOOR: 64-9, 5/31/23 - See last page for vote

SUBJECT: Cannabis: retail preparation, sale, and consumption of noncannabis food and beverage products

SOURCE: California Nightlife Association

United Cannabis Business Association

DIGEST:

This bill authorizes a licensed cannabis retailer or microbusiness to prepare or sell noncannabis, non-alcoholic food or beverage products, in compliance with retail food code requirements, where the consumption of cannabis is currently allowed and in accordance with local requirements, and requires those products to be kept separately from the cannabis and cannabis products. This bill prohibits noncannabis food and beverage products from containing industrial hemp or hemp products, as specified. This bill permits a licensed cannabis retailer to sell non-cannabis prepackaged food and beverages, as specified, and permits live music or other performances on the premises of a retailer or microbusiness where cannabis consumption is permitted.

Senate Floor Amendments of 8/22/23 clarify that noncannabis food or beverage products, along with prepackaged noncannabis-infused, nonalcoholic food and beverages are prohibited from including hemp or industrial hemp products; prohibit a licensed retailer or microbusiness with a suspended license from selling noncannabis food or beverage products; require all noncannabis food and beverage products to be stored and displayed separately and distinctly from all cannabis and cannabis products; and, further clarify that a licensed retailer or microbusiness is not authorized to prepare or sell industrial hemp, or any products containing industrial hemp, as specified.

ANALYSIS:

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 of Cannabis Control (DCC) to regulate cannabis with the sole authority to create, issue, deny, renew, discipline, suspend, or revoke licenses for microbusinesses, transportation, storage unrelated to manufacturing activities, distribution, testing, and sale of cannabis and cannabis products within the state. Requires the DCC to administer the portions of MAUCRSA related to and associated with the cultivation of cannabis and with the manufacturing of cannabis products. Delegates to the DCC authority to create, issue, deny, and suspend or revoke cultivation or manufacturing licenses for violations of MAUCRSA. (BPC §§ 26010, 26012)
3. Expresses that state cannabis laws shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate cannabis businesses. (BPC § 26200(a))
4. Authorizes a local jurisdiction to allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a licensed retailer or microbusiness if all of the following are met:
   1. Access to the area where cannabis consumption is allowed is restricted to persons 21 years of age or older.
   2. Cannabis consumption is not visible from any public place or nonage-restricted area.
   3. Sale or consumption of alcohol or tobacco is not allowed on the premises. (BPC § 26200(g))
5. Establishes the Retail Food Code for the purpose of safeguarding public health and providing to consumers food that is safe, unadulterated, and honestly presented through adoption of science-based standards. (Health and Safety Code § 113700 et seq.)
6. Permits a licensed retailer or licensed microbusiness authorized for retail sales who operates a consumption area on the licensed premises, as specified, to also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales. (Title 4 California Code of Regulations §15407).
7. States that nothing shall be interpreted to prevent consumers from bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities. (Title 4 California Code of Regulations §15407).

This bill:

1. Permits a local jurisdiction to allow for the preparation or sale of noncannabis food or beverage products, in compliance with the applicable provisions of the California Retail Food Code, by a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed.
2. Permits a local jurisdiction to allow for live musical or other performances on the premises of a licensed retailer or microbusiness where the consumption of cannabis is allowed and for the sale of those tickets.
3. Permits a local jurisdiction to allow for the sale of prepackaged, non-cannabis infused, nonalcoholic food and beverages by a licensed retailer.
   
4. Prohibits noncannabis food or beverage products from including industrial hemp products or hemp products, as specified.
   
5. Prohibits a licensed cannabis retailer or microbusiness from selling noncannabis food or beverage products, as specified, if the license of a retailer or microbusiness is suspended, as specified.
   
6. Requires a licensed retailer or microbusiness to store noncannabis food and beverage products separately and distinctly from all cannabis and cannabis products.
   
7. Makes other technical and clarifying changes.

Background

MAUCRSA generally prohibits smoking, vaporizing, or ingesting cannabis or cannabis products in any public place. However, Proposition 64 authorized local jurisdictions to allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a retailer or microbusiness licensed under certain conditions. This language gave cities and counties the option of locally authorizing the establishment of settings like lounges or areas where cannabis use can occur socially.

Until last year, cannabis retailers who were permitted by their local jurisdictions to operate a consumption lounge or consumption area were not permitted to sell non-alcoholic prepackaged food or beverages. In November of 2022, the DCC revised its regulations to permit cannabis retailers who operate a consumption area to “sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales.”

The regulations further clarified that nothing in regulations prevents consumers from “bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities.”

A “consumption lounge” or “consumption area” in the cannabis space is where a patron can consume authorized cannabis products on site. In order to obtain local approval, the consumption lounge area where cannabis is consumed is restricted to persons 21-years or older, consumption is not visible from any public place, and alcohol sales are prohibited.

Currently there are a number of jurisdictions that permit consumption lounges to operate as part of their cannabis regulatory program, including, but not limited to, San Francisco, Oakland, Alameda, Palm Springs, Cathedral City, Sacramento, Ukiah, Cloverdale, Arcata, Fortuna, Ft. Bragg. However, as noted, those venues are limited in their ability to sell or provide food or beverages prepared onsite to consumers while there. This bill would not require consumption lounges offer food, and leaves it open to local jurisdiction authorization and oversight.

Separate and apart from the provisions of this bill that allows locally approved consumption lounges or consumption areas to sell food and beverages made on site, this bill allows prepackaged, non-alcoholic food and beverages to be sold to consumers at all licensed retailers, regardless if that retailer operates a consumption lounge. In order to sell the prepackaged food, the licensed retailer would need approval from the local jurisdiction. As currently drafted, this bill does not require a licensee to provide notice or any information to the DCC that they are a consumption lounge selling food and beverage or that they are a retailer selling prepackaged food and beverages. Any enforcement related issues to the food and beverage sales would likely be addressed at the local level.

Recent amendments clarify that licensed retailers or microbusinesses that choose to offer noncannabis food or beverage products must keep those products separate and distinct from all cannabis and cannabis products. If a licensed retailer or microbusiness has their license suspended, they are not permitted to continue to sell the noncannabis food or beverage products until their license is restored to its active status.

This bill additionally permits live musical or other performances on the premises of a licensed retailer or microbusiness where consumption is permitted. Because these live performances would only be authorized at consumption lounges, they would have to abide by current law with respect to limited access to those 21-years and older, the areas of cannabis consumption are not visible from any public place and tobacco or alcohol sales are not permitted on the premises. Recent amendments clarify that a licensed retailer or microbusiness may not sell or prepare any products that contain industrial hemp or hemp products.

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

SUPPORT: (Verified 8/21/23)

California Nightlife Association (co-source)

United Cannabis Business Association (co-source)

Angeles Emeralds

California Cannabis Industry Association

California Minority Alliance

California NORML

Coachella Valley Cannabis Alliance Network

Harvest Law

Lompoc Valley Cannabis Association, Santa Barbara County

Long Beach Collective Association

San Francisco Cannabis Retailers Alliance

San Francisco Cannabis Retailers Association

Silicon Valley Cannabis Alliance

Social Equity LA

The Greater Los Angeles Hospitality Association

The Parent Company

OPPOSITION: (Verified 8/21/23)

American Cancer Society Cancer Action Network Inc.

American Heart Association

American Lung Association of California

Americans for Nonsmokers' Rights

Public Health Institute

Tobacco Education and Research Oversight Committee

ARGUMENTS IN SUPPORT: Supporters note this bill will help expand opportunities for cannabis businesses while maintaining local control.

ARGUMENTS IN OPPOSITION: Opponents note concerns about the increase of secondhand smoke and the health impacts on workers and workers’ safety.

ASSEMBLY FLOOR: 64-9, 5/31/23

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

NOES: Megan Dahle, Davies, Dixon, Vince Fong, Mathis, Muratsuchi, Jim Patterson, Sanchez, Ta

NO VOTE RECORDED: Arambula, Bains, Boerner, Essayli, Gallagher, Irwin, Weber

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

8/23/23 14:52:02

**** END ****

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Richard Roth, Chair

2023 - 2024 Regular

Bill No: AB 374 Hearing Date: June 26, 2023

Subject: Cannabis: retail preparation, sale, and consumption of noncannabis food and beverage products

SUMMARY:

Authorizes a licensed cannabis retailer or microbusiness to prepare or sell non-cannabis, non-alcoholic food or beverage products, in compliance with retail food code requirements, where the consumption of cannabis is currently allowed and in accordance with local requirements. Permits a licensed cannabis retailer to sell non-cannabis prepackaged food and beverages, as specified, and permits live music or other performances on the premises of a retailer or microbusiness where cannabis consumption is permitted.

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 of Cannabis Control (DCC) to regulate cannabis with the sole authority to create, issue, deny, renew, discipline, suspend, or revoke licenses for microbusinesses, transportation, storage unrelated to manufacturing activities, distribution, testing, and sale of cannabis and cannabis products within the state. Requires the DCC to administer the portions of MAUCRSA related to and associated with the cultivation of cannabis and with the manufacturing of cannabis products. Delegates to the DCC authority to create, issue, deny, and suspend or revoke cultivation or manufacturing licenses for violations of MAUCRSA. (BPC §§ 26010, 26012)
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. Establishes grounds for disciplinary action against cannabis licensees, including failures to comply with state licensing requirements as well as local laws and ordinances. (BPC § 26030)
5. Subjects cannabis businesses operating without a license to civil penalties of up to three times the amount of the license fee for each violation in addition to any criminal penalties. (BPC § 26038)
6. Expresses that state cannabis laws shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate cannabis businesses. (BPC § 26200(a))
7. Authorizes a local jurisdiction to allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a licensed retailer or microbusiness if all of the following are met:
   
   1. Access to the area where cannabis consumption is allowed is restricted to persons 21 years of age or older.
   2. Cannabis consumption is not visible from any public place or nonage-restricted area.
   3. Sale or consumption of alcohol or tobacco is not allowed on the premises. (BPC § 26200(g))
      
8. Establishes the Retail Food Code for the purpose of safeguarding public health and providing to consumers food that is safe, unadulterated, and honestly presented through adoption of science-based standards. (Health and Safety Code § 113700 et seq.)
   
9. Permits a licensed retailer or licensed microbusiness authorized for retail sales who operates a consumption area on the licensed premises, as specified, to also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales. (Title 4 California Code of Regulations §15407).
   
10. States that nothing shall be interpreted to prevent consumers from bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities. (Title 4 California Code of Regulations §15407).

This bill:

1. Permits a local jurisdiction to allow for the preparation or sale of cannabis or cannabis products, in compliance with the applicable provisions of the California Retail Food Code, by a licensed retailer or microbusiness in the area where the consumption of cannabis is allowed.
   
2. Permits a local jurisdiction to allow for live musical or other performances on the premises of a licensed retailer or microbusiness where the consumption of cannabis is allowed and for the sale of those tickets.
   
3. Permits a local jurisdiction to allow for the sale of prepackaged, non-cannabis infused nonalcoholic food and beverages by a licensed retailer.
   
4. Makes other technical and clarifying changes.

FISCAL EFFECT:

Unknown. This bill is not keyed fiscal by Legislative Counsel.

COMMENTS:

1. Purpose. This bill has two sponsors, the California Nightlife Association and the United Cannabis Business Association. According to the author, “Cannabis cafes are a safe and social environment for adults to responsibly use cannabis and often provide a boost to local economies through tourism and tax revenues. For example, the 700 cannabis cafes across the Netherlands generate over 1.5 million visitors a year, with the most prominent destination being Amsterdam. Amsterdam’s cannabis cafes also showcase a model that has efficiently worked to regulate the illicit cannabis market by creating a unique experience that the illicit cannabis market is unable to compete with.”
2. Background.

Cannabis Regulations and Cannabis Consumption. Shortly following the passage of Medical Marijuana Regulation and Safety Act (later renamed to the Medical Cannabis Regulation and Safety Act 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.

MAUCRSA generally prohibits smoking, vaporizing, or ingesting cannabis or cannabis products in any public place. However, Proposition 64 authorized local jurisdictions to allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a retailer or microbusiness licensed under certain conditions. This language gave cities and counties the option of locally authorizing the establishment of settings like lounges or areas where cannabis use can occur socially.

Until last year, cannabis retailers who were permitted by their local jurisdictions to operate a consumption lounge or consumption area were not permitted to sell non-alcoholic prepackaged food or beverages. In November of 2022, the DCC revised its regulations to permit cannabis retailers who operate a consumption area to “sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales.”

The regulations further clarified that nothing in regulations prevents consumers from “bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities.”

The DCC’s regulations created a model wherein non-cannabis food and beverages can be sold and consumed in a consumption lounge. However, the law still does not allow cannabis retailers to prepare the food or beverages on the premises. This bill would expand upon the DCC’s current regulations and statutorily authorize cannabis retailers who have received local authorization to operate a consumption lounge or consumption area to sell food or beverages that are made on site. The prohibition on alcoholic products at these locations would remain. Additionally, this bill is clear that local jurisdictions must approve the operation of the consumption lounge, which must only be accessible to person 21-years or older, cannabis consumption not be visible from any public place or non-age restricted area. The inspection and oversight of the food sales would remain with local jurisdictions as these areas would be subject to the current provisions of the Retail Food Code, which contains the structural, equipment, and operational requirements for all California retail food facilities. Provisions of the California Retail Food Code are primarily enforced by 62 local environmental health regulatory agencies.

A “consumption lounge” or “consumption area” in the cannabis space is where a patron can consume authorized cannabis products on site. In order to obtain local approval, the consumption lounge area where cannabis is consumed is restricted to persons 21-years or older, consumption is not visible from any public place, and alcohol sales are prohibited. As noted in a June 21, 2022 New York Times article, “A Growing Number of California Cities Are Opening Weed Cafes” the popularity and interest for local jurisdictions throughout the state to permit specific cannabis lounges is increasing.

Local jurisdictions. The City of West Hollywood was the leader in the consumption lounge model. On November 20, 2017, the West Hollywood City Council adopted a Cannabis Ordinance providing local authorization for a variety of different licensed cannabis businesses. This included two types of consumption lounges: one featuring only edible cannabis products, and the other allowing smoking, vaping, and edibles.

Currently there are a number of jurisdictions that permit consumption lounges to operate as part of their cannabis regulatory program, including, but not limited to, San Francisco, Oakland, Alameda, Palm Springs, Cathedral City, Sacramento, Ukiah, Cloverdale, Arcata, Fortuna, Ft. Bragg. However, as noted, those venues are limited in their ability to sell or provide food or beverages prepared onsite to consumers while there. This bill would not require consumption lounges offer food, and leaves it open to local jurisdiction authorization and oversight.

Prepackaged Food and Beverage Sales. Separate and apart from the provisions of this bill that would allow locally approved consumption lounges or consumption areas to sell food and beverages made on site, this bill would allow prepackaged, non-alcoholic food and beverages to be sold to consumers at all licensed retailers, regardless if that retailer operates a consumption lounge. In order to sell the prepackaged food, the licensed retailer would need approval from the local jurisdiction. As currently drafted, this bill would not require a licensee to provide notice or any information to the DCC that they are a consumption lounge selling food and beverage or that they are a retailer selling prepackaged food and beverages. Any enforcement related issues to the food and beverage sales would likely be addressed at the local level.

Live musical and other performances. In addition to permitting the sale of noncannabis foods and beverages at consumption lounge locations approved by local jurisdictions, this bill would permit live musical or other performances on the premises of a licensed retailer or microbusiness where consumption is permitted.

Because these live performances would only be authorized at consumption lounges, they would have to abide by current law with respect to limited access to those 21-years and older, the areas of cannabis consumption are not visible from any public place and tobacco or alcohol sales are not permitted on the premises.

SB 285 of 2023. This Committee heard and passed SB 285 (Allen of 2023) on April 17, 2023 on a 12-1 vote. SB 285 is almost identical to this bill, except this bill will additionally permit live music and other performances at a consumption lounge if approved by a local jurisdiction and permits the sale of tickets for such shows or events.

1. Related Legislation. SB 285 (Allen of 2023) authorizes a licensed cannabis retailer or microbusiness to prepare or sell non-cannabis non-alcoholic food or beverage products, in compliance with retail food code requirements, where the consumption of cannabis is currently allowed and in accordance with local requirements. Permits a licensed cannabis retailer to sell non-cannabis prepackaged food and beverages, as specified. (Status: This bill is currently pending in the Assembly Committee on Governmental Organization)

AB 420 (Aguiar-Curry of 2023), among other provisions, specifies that a MAUCRSA licensee is not prohibited from manufacturing, distributing, or selling products that contain industrial hemp, or cannabinoids, extracts, or derivatives from industrial hemp, if the product complies with all applicable state laws and regulations. (Status: This bill is also being heard in this Committee on June 26, 2023)

AB 1034 (Bloom) of 2021, would have authorized a local jurisdiction to allow for the preparation or sale of noncannabis food or beverage products by a licensed cannabis retailer or microbusiness in an area where the consumption of cannabis is allowed. (Status: This bill failed passage in this Committee)

AB 2020 (Quirk, Chapter 749, Statutes of 2018) authorized a local jurisdiction to allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a licensed retailer or microbusiness, under the following circumstances: a) access to the area where cannabis consumption is allowed is restricted to persons 21 years of age or older; b) cannabis consumption is not visible from any public place or nonage-restricted area; c) sale or consumption of alcohol or tobacco is not allowed on the premises.

AB 1465 (Bloom) of 2019 would have created a new cannabis license type for a “consumption cafe/lounge,” in which customers may consume cannabis and cannabis products onsite within an establishment that may prepare and sell noncannabis products. (Status: This bill was held under submission in the Assembly Appropriations Committee.)

1. Arguments in Support. United Cannabis Business Association, California Nightlife Association, Angeles Emeralds, California Minority Alliance, Coachella Valley Cannabis Alliance Network, Long Beach Collective Association, San Francisco Cannabis Retailers Alliance, Silicon Valley Cannabis Alliance, and Social Equity LA write in support and note, “AB 374 addresses the economic need for cannabis retailers to diversify their offerings by allowing for the sale of event tickets, food and non-alcoholic beverages, ultimately providing consumers a unique, safe, and responsible experience in competition to the illicit market.”

California Cannabis Industry Association writes in support, “AB 374 furthers the mission of Proposition 64 by preserving local control, while expanding opportunities for cannabis retailers to offer new and enhanced customer experiences.”

Cal NORML writes in support, “The current legal prohibition on fresh refreshments and entertainment is arbitrary and unnecessary, with no logical backing from an economic, health, or safety standpoint. AB 374 will allow local governments to eliminate these restrictions and authorize cannabis cafes in their jurisdictions. In addition to serving local residents, cannabis cafes could offer an attractive source of tourist revenue to localities that want them.”

Harvest Law writes, “Allowing cannabis lounges the commonsense option to sell food and beverage that is not prepackaged and giving them flexibility to provide entertainment will give a much-needed lifeline to legal cannabis retailers, many of which are struggling to survive in the industry. Additionally, this bill will give our communities new, exciting opportunities to offer arts and entertainment in spaces that were previously unavailable for such uses.”

San Francisco Cannabis Retailers Association writes in support, “Additionally, this bill will give our communities new, exciting opportunities to offer arts and entertainment in spaces where it was previously impossible to do so.”

The Greater Los Angeles Hospitality Association notes, “Additionally, this bill will give our communities mew. Exciting opportunities to offer arts and entertainment in spaces where it was previously impossible to do so economically.”

The Parent Company notes, “Being able to offer more products allows the businesses to strengthen their retail capacity while also generating additional sales tax revenue for local jurisdictions and the state.”

1. Arguments in Opposition. The American Cancer Society Cancer Action Network, the American Heart Association, and the American Lung Association write in opposition and note, “California has fought hard to protect workers and ensure a safe, healthy, smoke free work environment. AB 374 will undo that by re-creating the harmful work environments of the past.”

Americans for Nonsmokers’ Rights writes in opposition and notes, “Cannabis secondhand smoke and aerosol are a source of indoor pollution and toxins being emitted into the environment, and cannabis products should not be smoked or vaped in indoor spaces in order to protect the health of workers and patrons. While cannabis is now legal, it should not be used in ways that harm other people.”

Public Health Institute writes in opposition and notes, “Even at outdoor events, worker health is affected, as evidenced by a study of law enforcement officers providing security at outdoor concerts where cannabis use was widespread, cannabis was present in the post-event urine of 34% and officers reported common symptoms during the concerts including burning, itchy, or red eyes (31%); dry mouth (21%); headache (21%); and coughing (21%).”

Tobacco Education and Research Oversight Committee writes in opposition and notes, “TEROC is also concerned that the passage of this bill also threatens existing social expectations around where it is appropriate to smoke and vape in California by creating the impression that smoking and vaping inside is safe and acceptable. California has an extensive 30-year history of adopting strong smoke-free policies to protect all Californians from exposure to SHS, both in and out of the workplace, and as a result of these policies, many Californians have grown up without ever having been to a bar, restaurant, or other indoor area where smoking or vaping is allowed.”

SUPPORT AND OPPOSITION:

Support:

United Cannabis Business Association (co-sponsor)

California Nightlife Association (co-sponsor)

Angeles Emeralds

California Cannabis Industry Association

California Minority Alliance

California Norml

Coachella Valley Cannabis Alliance Network

Harvest Law

Lompoc Valley Cannabis Association, Santa Barbara County

Long Beach Collective Association

San Francisco Cannabis Retailers Alliance

San Francisco Cannabis Retailers Association

Silicon Valley Cannabis Alliance

Social Equity LA

The Greater Los Angeles Hospitality Association

The Parent Company

Opposition:

American Cancer Society Cancer Action Network INC.
American Heart Association
American Lung Association of California
Americans for Nonsmokers' Rights
Public Health Institute
Tobacco Education and Research Oversight Committee

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 374

Author:(Haney)

As Amended Ver:May 18, 2023

Majority vote

SUMMARY

Authorizes local jurisdictions to allow cannabis retailers to prepare and serve non-cannabis food and beverages, and to hold and sell tickets to live musical or other performances, in the area of the premises where consumption of cannabis and cannabis goods is authorized.

Major Provisions

1. Authorizes a local jurisdiction to allow a licensed cannabis retailer or microbusiness to conduct the following business activities on its premises in addition to consuming cannabis or cannabis products, with the exception of selling alcohol or tobacco.
   1. Preparing and selling non-cannabis-infused food and nonalcoholic beverages.
   2. Allowing, and selling tickets for, live musical or other performances.
2. Requires all noncannabis food or beverage products to be prepared and sold in compliance with the California Retail Food Code.

COMMENTS

Cannabis Consumption Lounges. The author states that the intent of this bill is to allow for cannabis retailers to engage in a business model analogous to establishments found in Amsterdam. While cannabis is officially a controlled substance in the Netherlands and both possession and cultivation of the plant is a crime, the country has long applied what is referred to as gedoogbeleid—a policy of tolerance. The Dutch Ministry of Justice has consistently tolerated possession of up to five grams of cannabis for personal and cultivation of up to five plants. This policy effectively decriminalizes recreational consumption of cannabis, though possession or cultivation beyond personal use is still subject to criminal penalties.

As a result of the country's tolerance policy, there has been a proliferation of so-called "coffeeshops" in cities such as Amsterdam where cannabis may be sold and consumed. While there is no formally lawful way for these establishments to purchase bulk cannabis for resale, consumers may safely purchase and consume cannabis within the personal use limits on the premises. According to the author, these establishments often serve as social hubs where live music may be performed, and food and beverages not containing cannabis are available for purchase and consumption.

There are some restrictions on the Amsterdam model. Dutch law has long prohibited the sale and consumption of alcohol in coffeeshops, and a national tobacco smoking ban applies to activities within those establishments. Since 2008, Dutch law has prohibited coffeeshops from being operated within 250m of schools. In an effort to combat concerns of "drug tourism," the Dutch government announced in 2011 that tourists were to be banned from patronizing coffeeshops.

The coffeeshop establishment model is arguably only partially allowable under California law. MAUCRSA prohibits smoking, vaporizing, or ingesting cannabis or cannabis products in any public place. However, Proposition 64 authorized local jurisdictions to allow for cannabis or to be consumed on the premises of a retailer or microbusiness licensed under certain conditions. This language gave cities and counties the option of locally allowing for the establishment of settings referred to commonly as "consumption lounges" where cannabis use can occur socially.

However, MAUCRSA law does not expressly allow for licensees to sell non-cannabis food or beverages within a consumption lounge. The law also does not speak to the legality of selling tickets to performances held on the premises. However, Section 15407 in regulations adopted by the Department of Cannabis Control (Department) stated: "In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and the branded merchandise of any licensee." This regulation historically prohibited cannabis retailers from selling food or beverages not infused with cannabis, including on the premises of a consumption lounge.

This prohibition would not allow for the type of consumption lounges proposed by the City of West Hollywood, which adopted a Cannabis Ordinance on November 20, 2017. License applicants presented the city with hospitality-focused business proposals, where customers would be able to consume cannabis and cannabis products in a "social lounge" setting. One proposal described itself as a "full service restaurant" offering meals "featuring local, organic ingredients with farm-to-table preparation." Under the proposal, these meals could be optionally enhanced "with CBD and THC infused dressings and sauces, natural agave sweeteners, and wellness shots." The City of West Hollywood sponsored multiple bills to preempt the Department's regulations, but these measures did not reach the Governor's desk.

In 2022, the Department revised its regulations to additionally state that cannabis retailers who operate a consumption area to "may also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales." The Department's revised regulations further clarified that nothing in its regulations prevents consumers from "bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities."

The Department's revised regulations created a model wherein non-cannabis food and beverages can be sold and consumed in a consumption lounge. However, the law still doesn't allow cannabis retailers to prepare fresh food or beverages on the premises. The regulations also do not allow for any other types of sales to occur on the premises of a cannabis retailer, including the sale of tickets to live musical performances.

This bill seeks to preempt the Department's regulations and amend the Medical Cannabis Regulation and Safety Act (MAUCRSA) to explicitly allow cannabis retailers to sell non-cannabis-infused food, nonalcoholic beverages, and tickets to live musical or other performances. This allowance would remain within the context of the consumption lounge model, which requires local authorization and approval. The bill would also retain MAUCRSA's prohibition against cannabis retailers selling or serving alcoholic beverages or tobacco products, and access to the consumption lounge area would remain restricted to persons 21 or older and be kept out of sight from the general public. The author believes that by expressly allowing for these sales to occur under MAUCRSA, California can more effectively market consumption lounges as a social venue where consumers can enjoy activities that are more inclusive than simply consuming cannabis.

According to the Author

"California is known worldwide as the birthplace of cannabis culture—but California's small cannabis businesses are struggling. Issues like over-saturation, high taxes, and the thriving black market are hurting cannabis businesses who follow the rules and pay taxes. California's decade of medical marijuana-only policies has led to pharmacy-like cannabis 'dispensaries' that encourages customers to buy cannabis and leave. Other cities, like Amsterdam, are known for their social, community style cannabis cafés. While consuming cannabis on-site is technically legal in California, selling non-cannabis-infused products is not. AB 374 legalizes cannabis cafes by allowing the sale of non-cannabis food and soft drink, allowing small cannabis retailers to diversify their business and move away from the limiting dispensary model."

Arguments in Support

The California Nightlife Association is sponsoring this bill, writing: "Allowing cannabis lounges the commonsense option to sell food and beverage that isn't 'prepackaged' and giving them flexibility to provide entertainment will give a much-needed lifeline to legal cannabis retailers who are struggling mightily to survive in the industry. Additionally, this bill will give our communities new, exciting opportunities to offer arts and entertainment in spaces where it was previously impossible to do so economically."

Arguments in Opposition

The American Cancer Society Cancer Action Network, the American Heart Association, and the American Lung Association write jointly in opposition to this bill, arguing: "This bill could essentially turn a cannabis establishment into a restaurant and potentially force workers to accept exposure to toxic chemicals in order to keep their jobs. Workers should not have to choose between their health and a good job." The letter concludes by stating: "California has fought hard to protect workers and ensure a safe, healthy, smoke free work environment. AB 374 will undo that by re-creating the harmful work environments of the past."

FISCAL COMMENTS

This bill is keyed nonfiscal by the Legislative Counsel.

VOTES

ASM BUSINESS AND PROFESSIONS: 15-2-1

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

NO: Dixon, Joe Patterson

ABS, ABST OR NV: Irwin

ASM GOVERNMENTAL ORGANIZATION: 17-4-1

YES: Santiago, Lackey, Aguiar-Curry, Berman, Bryan, Cervantes, Garcia, Gipson, Jones-Sawyer, Low, McCarty, McKinnor, Quirk-Silva, Ramos, Robert Rivas, Blanca Rubio, Villapudua

NO: Megan Dahle, Davies, Mathis, Ta

ABS, ABST OR NV: Jim Patterson

UPDATED

VERSION: May 18, 2023

CONSULTANT: Robert Sumner / B. & P. / (916) 319-3301 FN: 0000419

ASSEMBLY THIRD READING

ATR Bill Id:AB 374

Author:(Haney)

As Amended Ver:May 1, 2023

Majority vote

SUMMARY

Authorizes local jurisdictions to allow cannabis retailers to conduct business activities unrelated to cannabis on their premises, including, but not limited to, non-cannabis food and beverage sales and live musical or other performances.

Major Provisions

1. Authorizes a local jurisdiction to allow a licensed cannabis retailer or microbusiness to conduct the following business activities on its premises in addition to consuming cannabis or cannabis products, with the exception of selling alcohol or tobacco.
   1. Preparing and selling non-cannabis-infused food and nonalcoholic beverages.
   2. Allowing, and selling tickets for, live musical or other performances.
2. Requires all noncannabis food or beverage products to be prepared and sold in compliance with the California Retail Food Code.

COMMENTS

Cannabis Consumption Lounges. The author states that the intent of this bill is to allow for cannabis retailers to engage in a business model analogous to establishments found in Amsterdam. While cannabis is officially a controlled substance in the Netherlands and both possession and cultivation of the plant is a crime, the country has long applied what is referred to as gedoogbeleid—a policy of tolerance. The Dutch Ministry of Justice has consistently tolerated possession of up to five grams of cannabis for personal and cultivation of up to five plants. This policy effectively decriminalizes recreational consumption of cannabis, though possession or cultivation beyond personal use is still subject to criminal penalties.

As a result of the country's tolerance policy, there has been a proliferation of so-called "coffeeshops" in cities such as Amsterdam where cannabis may be sold and consumed. While there is no formally lawful way for these establishments to purchase bulk cannabis for resale, consumers may safely purchase and consume cannabis within the personal use limits on the premises. According to the author, these establishments often serve as social hubs where live music may be performed, and food and beverages not containing cannabis are available for purchase and consumption.

There are some restrictions on the Amsterdam model. Dutch law has long prohibited the sale and consumption of alcohol in coffeeshops, and a national tobacco smoking ban applies to activities within those establishments. Since 2008, Dutch law has prohibited coffeeshops from being operated within 250m of schools. In an effort to combat concerns of "drug tourism," the Dutch government announced in 2011 that tourists were to be banned from patronizing coffeeshops.

The coffeeshop establishment model is arguably only partially allowable under California law. The Medicinal and Adult Use Cannabis Regulation Safety Act (MAUCRSA) prohibits smoking, vaporizing, or ingesting cannabis or cannabis products in any public place. However, Proposition 64 authorized local jurisdictions to allow for cannabis to be consumed on the premises of a retailer or microbusiness licensed under certain conditions. This language gave cities and counties the option of locally allowing for the establishment of settings referred to commonly as "consumption lounges" where cannabis use can occur socially.

However, MAUCRSA law does not expressly allow for licensees to sell non-cannabis food or beverages within a consumption lounge. The law also does not speak to the legality of selling tickets to performances held on the premises. However, Section 15407 in the Department's regulations stated: "In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and the branded merchandise of any licensee." This regulation historically prohibited cannabis retailers from selling food or beverages not infused with cannabis, including on the premises of a consumption lounge.

This prohibition would not allow for the type of consumption lounges proposed by the City of West Hollywood, which adopted a Cannabis Ordinance on November 20, 2017. License applicants presented the city with hospitality-focused business proposals, where customers would be able to consume cannabis and cannabis products in a "social lounge" setting. One proposal described itself as a "full service restaurant" offering meals "featuring local, organic ingredients with farm-to-table preparation." Under the proposal, these meals could be optionally enhanced "with CBD and THC infused dressings and sauces, natural agave sweeteners, and wellness shots." The City of West Hollywood sponsored multiple bills to preempt the Department's regulations, but these measures did not reach the Governor's desk.

In 2022, the Department revised its regulations to additionally state that cannabis retailers who operate a consumption area to "may also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales." The Department's revised regulations further clarified that nothing in its regulations prevents consumers from "bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities."

The Department's revised regulations created a model wherein non-cannabis food and beverages can be sold and consumed in a consumption lounge. However, the law still doesn't allow cannabis retailers to prepare fresh food or beverages on the premises. The regulations also do not allow for any other types of sales to occur on the premises of a cannabis retailer, including the sale of tickets to live musical performances.

This bill seeks to preempt the Department's regulations and amend MAUCRSA to explicitly allow cannabis retailers to sell non-cannabis-infused food, nonalcoholic beverages, and tickets to live musical or other performances. This allowance would remain within the context of the consumption lounge model, which requires local authorization and approval. The bill would also retain MAUCRSA's prohibition against cannabis retailers selling or serving alcoholic beverages or tobacco products, and access to the consumption lounge area would remain restricted to persons 21 or older and be kept out of sight from the general public. The author believes that by expressly allowing for these sales to occur under MAUCRSA, California can more effectively market consumption lounges as a social venue where consumers can enjoy activities that are more inclusive than simply consuming cannabis.

According to the Author

"California is known worldwide as the birthplace of cannabis culture—but California's small cannabis businesses are struggling. Issues like over-saturation, high taxes, and the thriving black market are hurting cannabis businesses who follow the rules and pay taxes. California's decade of medical marijuana-only policies has led to pharmacy-like cannabis 'dispensaries' that encourages customers to buy cannabis and leave. Other cities, like Amsterdam, are known for their social, community style cannabis cafés. While consuming cannabis on-site is technically legal in California, selling non-cannabis-infused products is not. AB 374 legalizes cannabis cafes by allowing the sale of non-cannabis food and soft drink, allowing small cannabis retailers to diversify their business and move away from the limiting dispensary model."

Arguments in Support

The California Nightlife Association is sponsoring this bill, writing: "Allowing cannabis lounges the commonsense option to sell food and beverage that isn't 'prepackaged' and giving them flexibility to provide entertainment will give a much-needed lifeline to legal cannabis retailers who are struggling mightily to survive in the industry. Additionally, this bill will give our communities new, exciting opportunities to offer arts and entertainment in spaces where it was previously impossible to do so economically."

Arguments in Opposition

The American Cancer Society Cancer Action Network, the American Heart Association, and the American Lung Association write jointly in opposition to this bill, arguing: "This bill could essentially turn a cannabis establishment into a restaurant and potentially force workers to accept exposure to toxic chemicals in order to keep their jobs. Workers should not have to choose between their health and a good job." The letter concludes by stating: "California has fought hard to protect workers and ensure a safe, healthy, smoke free work environment. AB 374 will undo that by re-creating the harmful work environments of the past."

FISCAL COMMENTS

This bill is keyed nonfiscal by the Legislative Counsel.

VOTES

ASM BUSINESS AND PROFESSIONS: 15-2-1

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

NO: Dixon, Joe Patterson

ABS, ABST OR NV: Irwin

ASM GOVERNMENTAL ORGANIZATION: 17-4-1

YES: Santiago, Lackey, Aguiar-Curry, Berman, Bryan, Cervantes, Garcia, Gipson, Jones‑Sawyer, Low, McCarty, McKinnor, Quirk-Silva, Ramos, Robert Rivas, Blanca Rubio, Villapudua

NO: Megan Dahle, Davies, Mathis, Ta

ABS, ABST OR NV: Jim Patterson

UPDATED

VERSION: May 1, 2023

CONSULTANT: Robert Sumner / B. & P. / (916) 319-3301 FN: 0000330

Date of Hearing: April 26, 2023

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Miguel Santiago, Chair

ABPCA Bill Id:AB 374 (

Author:Haney) – As Amended Ver:April 12, 2023

SUBJECT: Cannabis: local control: cannabis consumption

SUMMARY: Authorizes local jurisdictions to allow cannabis retailers to sell non-cannabis food and beverage products, and to permit and sell tickets to live musical or other performances, as well as to smoke, vaporize, and ingest cannabis or cannabis products on the premises, as specified. Specifically, this bill:

1) Authorizes a local jurisdiction to allow a licensed cannabis retailer or microbusiness to conduct the following business activities on the premises in addition to smoking, vaporizing, and ingesting of cannabis or cannabis products, with the exception of selling alcohol or tobacco:

a) Preparing or selling non-cannabis food or beverage products, in compliance with all applicable provisions of the California Retail Food Code, in the area where the consumption of cannabis or cannabis products is allowed.

b) Allowing, and selling tickets for, live musical or other performances.

2) Provides that a local jurisdiction may allow for the activities in 1) above, if certain conditions are met.

a) Access to the area where cannabis consumption is allowed is restricted to persons 21 years of age or older.

b) Cannabis consumption is not visible from any public place or nonage-restricted area.

c) Sale or consumption of alcohol or tobacco is not allowed on the premises.

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 (Business and Professions Code §§ 26000 et seq.)

2) Establishes the Department of Cannabis Control (DCC or 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. (Business and Professions Code § 26010)

3) Provides for twenty total types of cannabis licenses including subtypes for cultivation, manufacturing, testing, retail, distribution, and microbusiness. (Business and Professions Code § 26050)

4) Requires the DCC to convene an advisory committee to advise state licensing authorities on the development of standards and regulations for legal cannabis, including best practices and guidelines that protect public health and safety while ensuring a regulated environment for commercial cannabis activity that does not impose such barriers so as to perpetuate, rather than reduce and eliminate, the illicit market for cannabis. (Business and Professions Code § 26014)

5) Establishes grounds for disciplinary action against cannabis licensees, including failures to comply with state licensing requirements as well as local laws and ordinances. (Business and Professions Code § 26030)

6) Prohibits a cannabis licensee from selling alcoholic beverages or tobacco products on its premises. (Business and Professions Code § 26054)

7) Requires cannabis or cannabis products purchased by a customer to be placed in an opaque package prior to leaving a licensed retail premises. (Business and Professions Code § 26070.1)

8) Expresses that state cannabis laws shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate cannabis businesses.

(Business and Professions Code § 26200(a))

9) Authorizes a local jurisdiction to allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a licensed retailer or microbusiness if all of the following are met:

a) Access to the area where cannabis consumption is allowed is restricted to persons 21 years of age or older.

b) Cannabis consumption is not visible from any public place or nonage-restricted area.

c) Sale or consumption of alcohol or tobacco is not allowed on the premises. (Business and Professions Code § 26200(g))

FISCAL EFFECT: This bill has been keyed fiscal by Legislative Counsel.

COMMENTS:

Double referral. This bill was heard by the Assembly Committee on Business and Professions on April 11, 2023, and passed that Committee by a vote of 15 to 2.

Purpose of the bill. According to the author’s office, “California is known worldwide as the birthplace of cannabis culture—but California’s small cannabis businesses are struggling. Issues like over-saturation, high taxes, and the thriving black market are hurting cannabis businesses who follow the rules and pay taxes. California’s decade of medical marijuana-only policies has led to pharmacy-like cannabis ‘dispensaries’ that encourages customers to buy cannabis and leave. Other cities, like Amsterdam, are known for their social, community style cannabis cafés. While consuming cannabis on-site is technically legal in California, selling non-cannabis-infused products is not. AB 374 legalizes cannabis cafes by allowing the sale of non-cannabis food and soft drink, allowing small cannabis retailers to diversify their business and move away from the limiting dispensary model.”

The author's office states that this bill is not about coffee shops being allowed to sell cannabis. But rather cannabis stores should be able to sell coffee. It shouldn’t be illegal for an existing cannabis business to move away from only selling marijuana and instead have the opportunity to grow, thrive and create jobs by offering coffee or live jazz.

Background.

Oversight of Cannabis in California. In 1996, voters approved Proposition 215, the Compassionate Use Act, which legalized cannabis consumption for the first time in California. In accordance with a physician's recommendation, Proposition 215 protected eligible patients and their caregivers from prosecution in connection with the possession and cultivation of cannabis for medical purposes.

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.

Cannabis Consumption Lounges. The author states that the purpose of the bill is to allow cannabis retailers to engage in a business model similar to establishments found in Amsterdam. While cannabis is officially a controlled substance in the Netherlands, where possession and cultivation of the plant is a crime, the country has long adopted what is known as gedoogbeleid — a policy of tolerance. The cultivation of up to five plants and personal possession of up to five grams of cannabis are both permitted by the Dutch Ministry of Justice. Although possession or cultivation of cannabis for purposes other than personal use still carry the risk of criminal prosecution, this policy effectively decriminalizes its use for recreational consumption.

As a result of the country’s tolerance policy, there has been a proliferation of so-called
“coffee shops” in cities such as Amsterdam where cannabis may be sold and consumed. While there is no formally lawful way for these establishments to purchase bulk cannabis for resale,
consumers may safely purchase and consume cannabis within the personal use limits on the
premises. According to the author, these establishments often serve as social hubs where live
music may be performed, and food and beverages not containing cannabis are available for
purchase and consumption.

There are some restrictions on the Amsterdam model. Dutch law prohibits the sale and
consumption of alcohol in coffee shops, and a national tobacco smoking ban applies to those establishments. Since 2008, Dutch law has prohibited coffee shops from being operated within 250m of schools. In an effort to combat concerns of “drug tourism,” the Dutch government
announced in 2011 that tourists were to be banned from patronizing coffee shops.

The coffee shop establishment model is arguably only partially allowable under California law.
MAUCRSA generally prohibits smoking, vaporizing, or ingesting cannabis or cannabis products
in any public place. However, Proposition 64 authorized local jurisdictions to allow for cannabis
or cannabis products to be consumed on the premises of a retailer or microbusiness licensed
under certain conditions. This language gave cities and counties the option of locally allowing
for the establishment of settings referred to commonly as “consumption lounges” where cannabis
use can occur socially.

However, MAUCRSA law does not expressly allow for licensees to sell non-cannabis food or
beverages within a consumption lounge. The law also does not speak to the legality of selling
tickets to performances held on the premises. However, Section 15407 in the Department’s
regulations states: “In addition to cannabis goods, a licensed retailer may sell only cannabis
accessories and the branded merchandise of any licensee.” This regulation historically
prohibited cannabis retailers from selling food or beverages not infused with cannabis, including
on the premises of a consumption lounge.

This prohibition would not allow for the type of consumption lounges proposed by the City of West Hollywood, which adopted a Cannabis Ordinance on November 20, 2017. License
applicants presented the city with hospitality-focused business proposals, where customers
would be able to consume cannabis and cannabis products in a “social lounge” setting. One
proposal described itself as a “full service restaurant” offering meals “featuring local, organic ingredients with farm-to-table preparation.” Under the proposal, these meals could be optionally enhanced “with CBD and THC infused dressings and sauces, natural agave sweeteners, and wellness shots.” The City of West Hollywood sponsored multiple bills to preempt the Department’s regulations, but these measures did not reach the Governor’s desk.

In 2022, the DCC revised its regulations to additionally state that cannabis retailers who operate a consumption area to “may also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales.” The Department’s revised regulations further clarified that nothing in its regulations prevents consumers from “bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities.”

The DCC's revised regulations created a framework for the sale and consumption of non-cannabis food and drink in consumption lounges. The production of fresh food or beverages on the premises by cannabis retailers is still prohibited by law. The regulations forbid cannabis retailers from selling any other products or services, including tickets to live musical performances, on their property.

The bill would amend MAUCRSA and preempt the DCC's regulations by stating that a local jurisdiction may allow a retailer or microbusiness to sell non-cannabis food and beverage products as well as tickets for live musical or other performances to be held on the premises, in addition to smoking, vaporizing, and ingesting cannabis or cannabis products. The bill maintains MAUCRSA’s prohibition against cannabis retailers selling or serving alcoholic beverages or tobacco products, and access to the retailer or microbusiness would remain restricted to persons 21 or older and be kept out of sight from the general public. The author believes that by expressly allowing for these sales to occur under MAUCRSA, a licensed retailer or microbusiness can more successfully market the location as a social venue where customers can partake in activities that are more inclusive than simply consuming cannabis.

ABC Advisory (November 1, 2021) on Cannabis Products, Industrial Hemp Products, and

Alcoholic Beverages. The ABC advisory provided guidance relating to which activities are allowed on or in premises licensed by ABC. The advisory stated that “MAUCRSA (BPC §

26054) states that the holder of a license issued under the MAUCRSA “shall not sell alcoholic beverages or tobacco products on or at any premises licensed under this division.” In addition,

Section 15000.3 of the DCC regulations provides that a premises shall not be in a location that requires persons to pass through a business that sells alcohol or tobacco or a private residence to access the licensed premises, or that requires persons to pass through the licensed premises to access a business that sells tobacco or alcohol or a private residence. Commercial cannabis products may only be cultivated, processed, stored, or sold at premises licensed pursuant to the

MAUCRSA. Due to the restrictions on licensing and permissible activities, premises may not be licensed with both an ABC license and a license issued under MAUCRSA, even though a licensee may hold licenses (at separate premises) under both statutory schemes.”

In support. The California Cannabis Industry Association writes in support, “While some municipalities have chosen to heavily restrict, or outright ban, commercial cannabis within their jurisdiction, others have embraced commercial cannabis businesses and expanded retail access in novel ways. Some jurisdictions, including San Francisco and West Hollywood, allow the consumption of cannabis within the premises of a cannabis retailer. These “consumption lounges” provide a safe place for customers to smoke, vape, or otherwise ingest cannabis and cannabis products. In this same spirit of local control, this bill seeks to expand ways in which local governments may permit cannabis retail activity within their jurisdiction. AB 374 furthers the mission of Proposition 64 by preserving local control, while expanding opportunities for cannabis retailers to offer new and enhanced customer experiences.”

The California Nightlife Association writes, “Allowing cannabis lounges the commonsense option to sell food and beverage that isn’t ‘prepackaged’ and giving them flexibility to provide entertainment will give a much-needed lifeline to legal cannabis retailers who are struggling mightily to survive in the industry. Additionally, this bill will give our communities new, exciting opportunities to offer arts and entertainment in spaces where it was previously impossible to do so economically.”

In opposition. The American Cancer Society Cancer Action Network, the American Heart Association, and the American Lung Association write, “California has fought hard to protect workers and ensure a safe, healthy, smoke free work environment. AB 374 will undo that by re-creating the harmful work environments of the past. We have long known that breathing in secondhand smoke causes lung disease, heart disease and cancer. Secondhand marijuana smoke contains many of the same toxins and carcinogens found in directly inhaled marijuana smoke, in similar amounts if not more. In addition, particulate levels from marijuana smoke are higher than tobacco smoke. Exposure to fine particulate matter can cause cardiovascular disease, lung irritation, asthma attacks and makes respiratory infections more likely. Marijuana smoke has been shown to injure the cell linings of the large airways, and can lead to symptoms such as chronic cough, phlegm production, wheeze, and acute bronchitis.”

Policy consideration. To further clarify that alcoholic beverages are not to be sold or consumed on premises, the bill should include an amendment stating the following:

(2) (A) Preparing or selling noncannabis food or beverage products, except for alcoholic beverages, in compliance with all applicable provisions of the California Retail Food Code (Chapter 1 (commencing with Section 113700) of Part 7 of Division 104 of the Health and Safety Code), by a retailer or microbusiness licensed under this division in the area where the consumption of cannabis or cannabis products is allowed.

Related legislation. AB 471 (Kalra) of 2023. This bill would authorize the DCC to issue a state caterer license that authorizes the licensee to serve cannabis at a private event approved by a local jurisdiction for the purpose of allowing event attendees to consume the cannabis. (Assembly Committee on Governmental Organization)

SB 285 (Allen) of 2023. This bill would authorize a local jurisdiction to allow for the preparation or sale of non-cannabis food or beverage products by a cannabis retailer in the area where the consumption of cannabis is allowed. (Passed the Senate Committee on Business, Professions and Economic Development by a 12-1 vote. The bill is pending on Senate floor.

Prior legislation. AB 2844 (Kalra) of 2022. This bill would have authorized the DCC to issue a state caterer license authorizing the licensee to serve cannabis for consumption by attendees age 21 or older at a private event approved by a local jurisdiction. (Held under submission by the Assembly Appropriations Committee)

AB 2210 (Quirk), Chapter 391, Statutes of 2022. Prohibits the DCC from denying an application for a state temporary event license solely on the basis that there is a license issued pursuant to the ABC Act for the proposed premises of the event. The bill would require all on- and off-sale privileges of alcoholic beverages at the venue to be suspended for the day of the event and would prohibit all alcohol consumption on the venue premises for the day of the event, and would prohibit those privileges and consumption from resuming until 6 a.m. on the day after the event.

AB 2691 (Wood) of 2022. Would have required the DCC to issue temporary event cultivator retail licenses to cannabis cultivators, as specified, for cannabis events operating in accordance with existing law. (Died on Assembly inactive file)

AB 1034 (Bloom) of 2021. Would have authorized a local jurisdiction to allow for the preparation or sale of non-cannabis food or beverage products by a licensed cannabis retailer or microbusiness in an area where the consumption of cannabis is allowed. (Never heard by the Senate Committee on Business, Professions and Economic Development)

AB 1465 (Bloom) of 2019. Would have created a new cannabis license type for a “consumption
cafe/lounge,” in which customers may consume cannabis and cannabis products onsite within an
establishment that may also prepare and sell non-cannabis products. (Held by the Assembly
Appropriations Committee)

AB 2914 (Cooley), Chapter 827, Statutes of 2018. Prohibited an alcoholic beverage licensee from selling, offering, or providing cannabis or cannabis products at its licensed premises, and prohibits a cannabis licensee from selling, offering, or providing a cannabis product that is an alcoholic beverage, as specified.

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

REGISTERED SUPPORT / OPPOSITION:

Support

Americans for Safe Access

California Cannabis Industry Association
California Nightlife Association (CALNIGHT)
California NORML
Harvest Law
Lompoc Valley Cannabis Association, Santa Barbara County
San Francisco Cannabis Retailers Association
The Greater Los Angeles Hospitality Association
The Parent Company
United Cannabis Business Association

Oppose

American Cancer Society Cancer Action Network, INC.
American Heart Association
American Lung Association of California
Americans for Nonsmokers' Rights
Public Health Institute

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531

Date of Hearing:

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Marc Berman, Chair

ABPCA Bill Id:AB 374

Author:(Haney) – As Introduced Ver:February 1, 2023

NOTE: This bill is double-referred and if passed by this Committee will be referred to the Assembly Committee on Governmental Organization.

SUBJECT: Cannabis: local control: cannabis consumption.

SUMMARY: Authorizes local jurisdictions to allow cannabis retailers to conduct business activities unrelated to cannabis on their premises, including, but not limited to, non-cannabis food and beverage sales and live musical or other performances.

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 of Cannabis Control (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. (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, including best practices and guidelines that protect public health and safety while ensuring a regulated environment for commercial cannabis activity that does not impose such barriers so as to perpetuate, rather than reduce and eliminate, the illicit market for cannabis. (BPC § 26014)
5. Establishes grounds for disciplinary action against cannabis licensees, including failures to comply with state licensing requirements as well as local laws and ordinances. (BPC § 26030)
6. Prohibits a cannabis licensee from selling alcoholic beverages or tobacco products on its premises. (BPC § 26054)
7. Requires 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)
8. Expresses that state cannabis laws shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate cannabis businesses. (BPC § 26200(a))
9. Authorizes a local jurisdiction to allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a licensed retailer or microbusiness if all of the following are met:
   1. Access to the area where cannabis consumption is allowed is restricted to persons 21 years of age or older.
   2. Cannabis consumption is not visible from any public place or nonage-restricted area.
   3. Sale or consumption of alcohol or tobacco is not allowed on the premises.

(BPC § 26200(g))

THIS BILL:

1. Authorizes a local jurisdiction to allow a licensed cannabis retailer or microbusiness to conduct any other business activities on its premises in addition to consuming cannabis or cannabis products, with the exception of selling alcohol or tobacco.
2. Specifically authorizes a local jurisdiction to allow a licensed cannabis retailer or microbusiness to sell non-cannabis-infused food and nonalcoholic beverages on its premises.
3. Specifically authorizes a local jurisdiction to allow a licensed cannabis retailer or microbusiness to allow for, and sell tickets for, live musical or other performances.

FISCAL EFFECT: Unknown; this bill is keyed fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by the California Night Life Association. According to the author:

“California is known worldwide as the birthplace of cannabis culture—but California’s small cannabis businesses are struggling. Issues like over-saturation, high taxes, and the thriving black market are hurting cannabis businesses who follow the rules and pay taxes. California’s decade of medical marijuana-only policies has led to pharmacy-like cannabis ‘dispensaries’ that encourages customers to buy cannabis and leave. Other cities, like Amsterdam, are known for their social, community style cannabis cafés. While consuming cannabis on-site is technically legal in California, selling non-cannabis-infused products is not. AB 374 legalizes cannabis cafes by allowing the sale of non-cannabis food and soft drink, allowing small cannabis retailers to diversify their business and move away from the limiting dispensary model.”

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.

Cannabis Consumption Lounges. The author states that the intent of this bill is to allow for cannabis retailers to engage in a business model analogous to establishments found in Amsterdam. While cannabis is officially a controlled substance in the Netherlands and both possession and cultivation of the plant is a crime, the country has long applied what is referred to as gedoogbeleid—a policy of tolerance. The Dutch Ministry of Justice has consistently tolerated possession of up to five grams of cannabis for personal and cultivation of up to five plants. This policy effectively decriminalizes recreational consumption of cannabis, though possession or cultivation beyond personal use is still subject to criminal penalties.

As a result of the country’s tolerance policy, there has been a proliferation of so-called “coffeeshops” in cities such as Amsterdam where cannabis may be sold and consumed. While there is no formally lawful way for these establishments to purchase bulk cannabis for resale, consumers may safely purchase and consume cannabis within the personal use limits on the premises. According to the author, these establishments often serve as social hubs where live music may be performed, and food and beverages not containing cannabis are available for purchase and consumption.

There are some restrictions on the Amsterdam model. Dutch law prohibits the sale and consumption of alcohol in coffeeshops, and a national tobacco smoking ban applies to those establishments. Since 2008, Dutch law has prohibited coffeeshops from being operated within 250m of schools. In an effort to combat concerns of “drug tourism,” the Dutch government announced in 2011 that tourists were to be banned from patronizing coffeeshops.

The coffeeshop establishment model is arguably only partially allowable under California law. MAUCRSA generally prohibits smoking, vaporizing, or ingesting cannabis or cannabis products in any public place. However, Proposition 64 authorized local jurisdictions to allow for cannabis or cannabis products to be consumed on the premises of a retailer or microbusiness licensed under certain conditions. This language gave cities and counties the option of locally allowing for the establishment of settings referred to commonly as “consumption lounges” where cannabis use can occur socially.

However, MAUCRSA law does not expressly allow for licensees to sell non-cannabis food or beverages within a consumption lounge. The law also does not speak to the legality of selling tickets to performances held on the premises. However, Section 15407 in the Department’s regulations states: “In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and the branded merchandise of any licensee.”^[1] This regulation historically prohibited cannabis retailers from selling food or beverages not infused with cannabis, including on the premises of a consumption lounge.

This prohibition would not allow for the type of consumption lounges proposed by the City of West Hollywood, which adopted a Cannabis Ordinance on November 20, 2017. License applicants presented the city with hospitality-focused business proposals, where customers would be able to consume cannabis and cannabis products in a “social lounge” setting. One proposal described itself as a “full service restaurant” offering meals “featuring local, organic ingredients with farm-to-table preparation.” Under the proposal, these meals could be optionally enhanced “with CBD and THC infused dressings and sauces, natural agave sweeteners, and wellness shots.” The City of West Hollywood sponsored multiple bills to preempt the Department’s regulations, but these measures did not reach the Governor’s desk.

In 2022, the Department revised its regulations to additionally state that cannabis retailers who operate a consumption area to “may also sell prepackaged, non-cannabis-infused, non-alcoholic food and beverages if the applicable local jurisdiction allows such sales.” The Department’s revised regulations further clarified that nothing in its regulations prevents consumers from “bringing or receiving non-cannabis-infused, non-alcoholic food and beverages from a restaurant or food delivery service for consumption in the designated consumption area on the licensed premises, if the applicable local jurisdiction allows such activities.”

The Department’s revised regulations created a model wherein non-cannabis food and beverages can be sold and consumed in a consumption lounge. However, the law still doesn’t allow cannabis retailers to prepare fresh food or beverages on the premises. The regulations also do not allow for any other types of sales to occur on the premises of a cannabis retailer, including the sale of tickets to live musical performances.

This bill seeks to preempt the Department’s regulations and amend MAUCRSA to explicitly allow cannabis retailers to sell non-cannabis-infused food, nonalcoholic beverages, and tickets to live musical or other performances. This allowance would remain within the context of the consumption lounge model, which requires local authorization and approval. The bill would also retain MAUCRSA’s prohibition against cannabis retailers selling or serving alcoholic beverages or tobacco products, and access to the consumption lounge area would remain restricted to persons 21 or older and be kept out of sight from the general public. The author believes that by expressly allowing for these sales to occur under MAUCRSA, California can more effectively market consumption lounges as a social venue where consumers can enjoy activities that are more inclusive than simply consuming cannabis.

Current Related Legislation. SB 285 (Allen) would authorize a local jurisdiction to allow for the preparation or sale of noncannabis food or beverage products by a cannabis retailer in the area where the consumption of cannabis is allowed. This bill is pending in the Senate Committee on Business, Professions and Economic Development.

Prior Related Legislation. AB 1034 (Bloom) would have authorized a local jurisdiction to allow for the preparation or sale of noncannabis food or beverage products by a licensed cannabis retailer or microbusiness in an area where the consumption of cannabis is allowed. This bill died in the Senate Committee on Business, Professions and Economic Development.

AB 1465 (Bloom) of 2019 would have created a new cannabis license type for a “consumption cafe/lounge,” in which customers may consume cannabis and cannabis products onsite within an establishment that may also prepare and sell noncannabis products. This bill died in Assembly Appropriations Committee.

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

ARGUMENTS IN SUPPORT:

The California Nightlife Association is sponsoring this bill, writing: “Allowing cannabis lounges the commonsense option to sell food and beverage that isn’t ‘prepackaged’ and giving them flexibility to provide entertainment will give a much-needed lifeline to legal cannabis retailers who are struggling mightily to survive in the industry. Additionally, this bill will give our communities new, exciting opportunities to offer arts and entertainment in spaces where it was previously impossible to do so economically.”

ARGUMENTS IN OPPOSITION:

None on file.

POLICY ISSUE(S) FOR CONSIDERATION:

As drafted, this bill would not be limited to the sales of non-cannabis food and beverages and tickets to live performances. The language of the bill explicitly says that its provisions are “not limited to” the explicitly provided examples of authorized activity. If the intent of the author is specifically to allow for consumption lounges to prepare and/or serve non-cannabis food and beverages, and to allow for live performances to occur on site with the option of selling tickets to those performances, the author may wish to amend the bill to more narrowly address those commercial activities.

AMENDMENTS:

To narrow the bill to specifically authorize the sale of non-cannabis food and beverages and ticketed live performances on the premises of a consumption lounge, the proposed paragraph (2) of subdivision (g) in the bill should be amended as follows:

(2) In exercising its authority under paragraph (1), a local jurisdiction may allow the retailer or microbusiness to conduct the following business activities on the premises in addition to other than the smoking, vaporizing, and ingesting of cannabis or cannabis products, including, but not limited to, any of the following:

(A) Selling non-cannabis-infused food. Preparing or selling noncannabis food or beverage products in compliance with all applicable provisions of the California Retail Food Code (Chapter 1 (commencing with Section 113700) of Part 7 of Division 104 of the Health and Safety Code) by a retailer or microbusiness licensed under this division in the area where the consumption of cannabis is allowed.

(B) Selling nonalcoholic beverages.

(C) Allowing, and selling tickets for, live musical or other performances.

REGISTERED SUPPORT:

California Nightlife Association (Sponsor)

California Cannabis Industry Association

California NORML

Greater Los Angeles Hospitality Association

Harvest Law

Lompoc Valley Cannabis Association, Santa Barbara County

San Francisco Cannabis Retailers Association

The Parent Company

United Cannabis Business Association

REGISTERED OPPOSITION:

None on file.

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

1. Identical language was previously included in regulations promulgated by the Bureau of Cannabis Control. ↑