Even with the release of state cannabis regulations — taking effect Jan. 1 — the overall regulatory process will still be a work in progress until next May, according to some legal firms assisting clients planning to get into the business of selling the legal recreational drug.
“It’s going to be interesting to see what Sacramento does,” said Blair Gue, an attorney and regulatory compliance team leader with Rogoway Law Group. “There are a number of things we just don’t know, such as how distributors will be able to get their product if there are only a few licensed suppliers in January. Or, how will a patient know if his or her medical cannabis dispensary obtains a state license — and how long will a patient be able to visit a dispensary that doesn’t apply for a state license? At the end of the day, it remains to be seen how many recreational dispensaries will be open in January.”
While details surrounding the state’s licensing process are still not cast in stone, those wishing to operate legally — including cultivators, manufacturers, transporters, distributors, lab testers and retail vendors of cannabis — have some decisions to make that affect their ability to function within compliance.
For example, before being eligible for a state license, cannabis operators must first receive local authorization to operate (usually in the form of a use permit, zoning clearance, or similar local permit) and all those they work with in the supply chain, from growers through retailers, must also be licensed, said attorney Kyndra Miller, CEO of CannaBusiness Law.
Each applicant faces a multitude of issues at the state and local level.
She said cannabis entrepreneurs must register with regional water quality control boards and be able to show proof that they plan to use water from a legal source.
“I’ve been accompanying local inspectors all over the state as they walk through properties intended for cannabis cultivation to see exactly what they are looking for,” said Miller. “Across the board, most people are focusing on local compliance, not state licensing requirements. While business operators may be able to negotiate with local authorities, the state typically formulates uniform rules and expectations covering all of California. My advice to those engaged in cannabis activities is keep their eyes on the prize, which is state licensing, not just municipal approvals.”
She said the land upon which a cannabis manufacturing operation is to be conducted must be properly zoned for this purpose. All 58 California counties have their own zoning rules. In most cases, manufacturers should seek light industrial or specific cannabis zoning to be in compliance.
For those planning to become distributors, track-and-trace systems must be in place from the start to record the sources and all subsequent parties that handle cannabis throughout the supply chain.
Distributors are also responsible for lab testing prior to placing cannabis on retail shelves, and these labs must also be licensed. This process can determine if pesticides are being used by farms adjacent to the cannabis growing area, which can affect the ability of the grower to market “organic” cannabis if runoff brings pesticide residue into a marijuana field.
From a federal perspective, all cannabis operations are illegal, according to U.S. Attorney General Jeff Sessions, Miller observed. California clients of leading cannabis legal consulting groups are advising operators to become aware of the civil and criminal consequences associated with cannabis.