On November 16, 2017, California’s three cannabis licensing agencies published emergency regulations to govern both the medical and adult-use cannabis industry in California under the Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) (Bus. & Prof. Code 26000 et seq.). The regulations published by the Bureau of Cannabis Control, the Department of Food and Agriculture and the Department of Public Health cover, among other things, cultivating, manufacturing, testing, growing, packaging and potency requirements.

Below are highlights of the emergency regulations. This post is the first in a series of entries on the Duane Morris Cannabis Industry blog that will provide an analysis of the new regulations. If you have any questions about the regulations, please contact Jennifer Briggs Fisher in our San Francisco office or Justin Santarosa in our Los Angeles office.

Licenses

Temporary licenses will be issued to qualifying businesses beginning on Jan. 1, 2018. A qualifying business is one that is holding a valid license, permit, or “other authorization” issued by the jurisdiction where the business operates. The State has indicated that it will be “very flexible” on what constitutes “other authorization.”

The full annual license application requires detailed information, including:

  • whether you’re applying for an “M License” or an “A License”
  • ownership information (an owner is a person who owns 20% or more of the licensed business)
  • a detailed premises diagram
  • a list of all of financing and financiers, including:
    • the funds held in savings, checking, or other accounts maintained by a financial institution;
    • loans and gifts;
    • investment funds and names of the investors; and
    • identifying information of anyone with a “financial interest” in the business.

“Identifying information” includes name, birthdate and a government issued identification number (driver’s license or passport) and “Financial interest” means “an investment into a commercial cannabis business, a loan provided to a commercial cannabis business, or any other equity interest in a commercial cannabis business.”

Cultivators will have additional requirements including information regarding water and power use and compliance with the California Environmental Quality Act.

There will be an application fee of $1,000 and license fees will range from $500 to $125,000 depending on the type of license and the size of operations, with cultivation licenses topping out at almost $80,000, based on production.

Grow Size

In a surprising move, California has not limited the size of farms. The Department of Food and Agriculture had previously proposed limiting the size to one-acre.

Limitations on Cannabis Products

The State has kept its low limit on the THC levels that may be contained in adult-use edibles. The state will limit the serving-size of edibles for adult-use to 10 milligrams of THC, with no more than 100 mg allowed in a single product package. Other cannabis products, such as tinctures, concentrates, and topicals, are limited to a maximum of up to 1,000 mg of THC per package, while medical-use products can 2,000 mg of THC per package.

In response to concerns regarding marketing to children, all designs depicting human beings, animals, insects, or fruit are prohibited.

Retail Restrictions

Retail stores – or dispensaries, as they are more commonly known – will be limited to operating between the hours of 6 a.m. and 10 p.m. Delivery is allowed, but only by a delivery employee of a licensed retailer. Retail stores will need to be at least 600 feet from a K-12 school, day care center, or youth center in existence when the license issued. Cannabis window displays are forbidden, and interior displays must not be visible to the outside public. Keep in mind that local town, city or county ordinances may impose further restrictions on dispensaries.

Employment Issues

All employees of a licensed entity must be at least 21 years old. In addition, every employee must have an identification badge on at all times (the regulations detail the specific requirements of the identification badge). Additionally, applicants with more than 20 employees must attest that they have entered into a labor peace agreement, and provide a copy to the Bureau of Cannabis Control. (A labor peace agreement is a neutrality agreement between a company and unions in which the employer agrees not to resist organizing attempts by its workers.)