Seyfarth Synopsis: California lawmakers are struggling to implement the regulations necessary to govern the sale of recreational marijuana, which is causing much uncertainty among businesses and local governments.
California voters passed the Adult Use Marijuana Act (“AUMA”) in November, but State officials are still struggling to figure out exactly how they will regulate the sale of marijuana for recreational use.
AUMA requires the State of California to begin accepting applications for licenses to sell recreational marijuana on January 1, 2018. But AUMA also requires State lawmakers to pass regulations before anyone can actually buy or sell recreational marijuana. These regulations would have to address not only how recreational shops are licensed and permitted, but also how the product is grown, tracked, tested, distributed, and taxed. Last week, the “czar” of the California Bureau of Medical Cannabis Regulation estimated that lawmakers may propose its recreational-use regulations as early as September, at which time the public would be permitted to comment on the proposed regulations before any final regulations are implemented.
But some are not so sure of this timeline, as recent media reports suggest lawmakers will be late in proposing these new regulations, citing the complexity of the framework necessary, the number of State agencies involved in drafting the regulations (at least three), as well as the “question mark” posed by the new Trump Administration and its potential move to enforce federal laws that currently classify marijuana as an illegal drug.
Other officials are also predicting a delay. While tens of millions of dollars have already been earmarked by Governor Jerry Brown to help implement the new regulations for recreational use, a California Legislative Analyst recently cautioned officials that they should be careful in allocating too much money, again citing the new Trump Administration as well as the difficulty in estimating how many marijuana businesses will pop up. For these reasons, Governor Brown is estimating that there will be no excise tax revenue from marijuana in 2017 or 2018. One State Senator involved in the process was quoted to the same effect, stating “there is no way the state of California can meet all of the deadlines before we go live on January 1, 2018. We are building the regulatory system for a multibillion dollar industry from scratch.”
Delay at the State level also means uncertainty at the local level as cities consider taking control of their own markets. AUMA provides local governments the authority to regulate marijuana-related activities, but the lack of State regulations or guidance has cast local governments’ future plans in doubt. In January 2017, the City of San Diego joined legalized recreational pot dispensaries to operate within its city limits, but still the sales of recreational marijuana cannot begin in San Diego until California’s regulations are implemented. Meanwhile, San Diego County Supervisors are still considering a ban on all marijuana businesses in unincorporated areas, and Sonoma County Supervisors have already passed a law banning commercial cultivation of marijuana in rural areas outside city limits.
The bottom line is there will be continued uncertainty about how and when recreational marijuana can be legally bought and sold until California lawmakers propose a regulatory framework. Voters were promised January 1, 2018, but that date now seems like a pipe dream.