The Cannabis Act (Bill C-45) received Royal Assent in June 2018, putting Canada on track to be the first G-7 country to legalize recreational cannabis when the Act comes into force on October 17, 2018. As the regulatory framework for cannabis slowly evolves, attention is now turning to the business of cannabis. According to Deloitte’s 2018 Cannabis Report, the total cannabis market in Canada (including medical, legal and illegal recreational products) is expected to generate up to $7.17 billion in total sales in 2019. The regulation of recreational cannabis will be shared by federal, provincial and municipal governments. Set out below is an overview of the legislative framework for cannabis and a brief description of the regulatory jurisdiction of each level of government.

What’s in a Name? Cannabis vs. Marijuana

Cannabis is the commonly used term to describe the products derived from the leaves, flowers and resins of the Cannabis sativa and Cannabis indica plants (or hybrids of the two). These products exist in various forms, such as dried leaves or oils, which are used for different medicinal, non-medicinal and industrial purposes. Under the Cannabis Act, the definition of cannabis is set out in Schedule 1:

  1. Any part of a cannabis plant, including the phytocannabinoids produced by, or found in, such a plant, regardless of whether that part has been processed or not, other than a part of the plant referred to in Schedule 2[1].
  2. Any substance or mixture of substances that contains or has on it any part of such a plant.
  3. Any substance that is identical to any phytocannabinoid produced by, or found in, such a plant, regardless of how the substance was obtained.

Marijuana (or marihuana) is commonly used to refer to parts of a cannabis plant, such as the leaves or flowers, but it is not a defined term under the Cannabis Act. Under the Controlled Drugs and Substances Act, the term ‘marihuana’ is referred to as a form of cannabis.

Legislative Overview

The Cannabis Act creates a legal framework for controlling the production, distribution, sale and possession of cannabis across Canada. Once it comes into force on October 17, 2018, adults who are 18 years of age or older will be able legally to (subject to any provincial or territorial restrictions):

  • possess up to 30 grams of legal cannabis, dried or equivalent in non-dried form in public;
  • share up to 30 grams of legal cannabis with other adults;
  • buy dried or fresh cannabis and cannabis oil from a provincially-licensed retailer (in provinces and territories without a regulated retail framework, individuals will be able to purchase cannabis online from federally-licensed producers);
  • grow, from licensed seed or seedlings, up to 4 cannabis plants per residence for personal use; and
  • make cannabis products, such as food and drinks, at home as long as organic solvents are not used to create concentrated products.

It should be noted that the sale of cannabis-infused edibles, beverages and pot for vaping will not be legal on October 17, 2018. The prohibition on these products will remain in place for up to one year while the federal government studies quality control, dosage, portion sizes and packaging.

Supporting regulations for the Cannabis Act were published in the Canada Gazette, Part II on July 11, 2018 and will come into force at the same time as the Act on October 17, 2018. These new regulations include the Cannabis Regulations and the Industrial Hemp Regulations.

The Cannabis Regulations provide that:

  • licences will be required for:
    • cultivating and processing cannabis
    • sale of cannabis for medical purposes
    • analytical testing of and research with cannabis
  • permits will be required to import or export cannabis for:
    • scientific or medical purposes, or
    • industrial hemp
  • licence holders will be subject to strict physical and personnel security requirements
  • plain packaging will be required for cannabis products:
    • the Regulations set out strict requirements for:
      • logos
      • colours
      • branding
    • cannabis products must also be labelled with:
      • mandatory health warnings
      • standardized cannabis symbol
      • specific information about the product
    • access to cannabis for medical purposes will continue to be provided for patients who need it:
      • the Regulations will substantively incorporate the current rules for access to cannabis for medical purposes, as set out in the Access to Cannabis for Medical Purposes Regulations
      • certain changes have been made to create consistency with rules for non-medical use of cannabis, to improve patient access and to reduce the risk of abuse of the system
    • manufacturers of prescription drugs containing cannabis, while primarily subject to the Food and Drugs Act and its regulations, will also be subject to certain regulatory requirements set out in the Cannabis Regulations.

The new Industrial Hemp Regulations under the Cannabis Act set out the requirements for cultivators of industrial hemp, which includes a requirement for industrial hemp to be grown from the hemp varieties approved for commercial cultivation. Industrial hemp is cannabis that contains 0.3% tetrahydrocannabinol (THC) or less in the flowering heads and leaves. While the new Industrial Hemp Regulations are generally consistent with the current Industrial Hemp Regulations:

  • some changes have been made in order to align licence requirements with the relatively low risk posed by industrial hemp, as compared with other varieties of cannabis; and
  • the sale of hemp plants (flowers, leaves and branches) to licensed cannabis processors will be permitted to provide a source of low THC, high cannabidiol (CBD) cannabis products.

It should be noted that cannabis for medical purposes will continue to be regulated in accordance with its own regime under the Access to Cannabis for Medical Purposes Regulations. More information on accessing cannabis for medical purposes and the process for applying to be a licensed producer is available here.

Jurisdictional Responsibilities

As noted above, all three levels of government will share responsibility for regulating the production, marketing, distribution and use of cannabis products. These responsibilities are outlined in more detail below.

The federal government’s responsibilities include setting: (i) requirements for producers who grow and manufacture cannabis products, and (ii) industry-wide rules and standards for:

  • types of cannabis products available for sale;
  • packaging and labelling requirements for products;
  • standardized serving sizes and potency;
  • prohibitions on the use of certain ingredients;
  • good production practices; and
  • tracking requirements of cannabis from seed to sale to keep it out of the illegal market restrictions on promotional activities.

Provinces and territories are responsible for developing, implementing, maintaining and enforcing systems to oversee the distribution and sale of cannabis. They will also be able to add their own safety measures, such as:

  • increasing the minimum age in their province or territory (but not lowering it);
  • lowering the personal possession limit in their jurisdiction;
  • creating additional rules for growing cannabis at home, such as lowering the number of plants per residence; and
  • restricting where adults can consume cannabis, such as in public or in vehicles.

Links to the various provincial and territorial regulatory web sites for cannabis are available here.

At the municipal level, the scope of regulations will be determined in accordance with the regulatory frameworks set out by provinces and territories. For municipalities, this means that each local jurisdiction’s responsibilities will vary depending on the province/territory. That said, there will be common elements to municipal jurisdiction. Based on an analysis by the Federation of Canadian Municipalities (FCM), municipalities are likely to be most active in the areas of zoning, business licensing, building code, municipal workplace safety and enforcement of regulations around public consumption and impaired driving. To help municipalities navigate the legalization of cannabis, FCM has published a Municipal Guide to Cannabis Legalization.

The legalization of cannabis brings with it not only significant policy impacts, but it also introduces a dynamic new market for a broad range of cannabis products for consumers. Until now, much of the discussion around cannabis legalization has been on public health and safety, however there are increasing calls for policy makers to consider the environmental impacts of growing cannabis and producing cannabis-infused products. In our Spotlight on Cannabis – Part 2, we explore the environmental impacts of cannabis cultivation on a commercial scale.