California’s three hashish businesses–the Bureau of Cannabis Control (BCC), California Department of Food and Agriculture (CDFA), and California Department of Public Health (CDPH)–aggressively regulate each facet of the state’s licensed hashish business. Most of the businesses’ guidelines make sense or have some justifiable goal. Today, I wish to discuss a number of the guidelines that create the most important complications for hashish licensees within the Golden State. This listing is on no account exhaustive, however we’ve got seen numerous stakeholders wrestle with compliance with every of them.

#1 Post-Approval Ownership Changes

The California hashish businesses have detailed laws requiring disclosures of modifications of “owners” and “financial interest holders”. What makes these guidelines problematic is that the businesses require disclosures after the modifications happen (in contrast to many municipalities which require pre-approval). These guidelines, in my view, are a number of the worst and could make hashish transactions extraordinarily troublesome to draft.

For instance, say an organization desires to purchase 50% of the shares of a licensed hashish entity. That firm must purchase these shares earlier than being disclosed to the hashish businesses. Problematically, there’s at all times a threat that the businesses may come again and refuse to approve the acquisition. From the customer’s viewpoint, that is extremely dangerous as a result of if the change is denied, the cash the customer paid could possibly be gone.

These guidelines result in every kind of transactions–every little thing from granting safety pursuits to paying nominal charges previous to regulatory approvals–and create pointless dangers and problems for M&A transactions or investments. It would have been a lot easier to easily enable licensees to submit requests earlier than possession modifications occurred.

#2 Hours of Operation

BCC rule 5403 solely permits retailers to promote or ship hashish between 6 AM and 10 PM. Rule 5415(d) additional states that supply begins when a driver leaves the premises and ends once they return, shortening that window since drivers have to be again earlier than 10 PM. In many instances, cities prohibit this window even additional. This is likely one of the much less defensible guidelines of the BCC. There’s no good purpose to chop gross sales off arbitrarily at 10 PM when alcohol can proceed to be bought effectively after that point. All this rule does is steer individuals who wish to buy hashish after hours to the illicit market.

#3 Branded Merchandise Limitations

Licensed retailers are permitted to promote sure branded merchandise, however the BCC maintains that retailers can’t promote different licensees’ branded merchandise. I’ve been instructed that the rationale for the rule was to ban the sale of merch from unlicensed manufacturers, however this doesn’t appear to be the perfect strategy. Per the BCC’s steerage, branded merch is handled like commercial and should determine the licensee accountable for the advert. With this in thoughts, the BCC may have simply allowed retailers to promote merch of different licensed firms. This rule simply makes it that a lot more durable for smaller or lesser-known manufacturers to get their identify on the market.

#4 Prohibition of Drive-Thru Sales

BCC rule 5025 prohibits drive-in or drive-through gross sales, aside from a restricted variety of companies who certified earlier than June 2018. It’s turn out to be painfully apparent over the previous few months how useful drive-through gross sales may have been with COVID-19. To be truthful, the BCC has relaxed some guidelines to permit curbside pickups upon sure requests, it looks like the prohibition on drive-through gross sales wants some critical revisiting, even for a post-COVID world.

#5 Distributor Packaging/Labeling Restrictions

BCC rule 5303 permits retailers to package deal, label, and re-package/re-label hashish and pre-rolls, however not manufactured merchandise. Previous emergency guidelines had allowed distributors to package deal and label manufactured items in sure circumstances, however this was faraway from the foundations. This created a lot of confusion when the rule was applied with none grace interval, and nonetheless results in difficulties every so often. Distributors who be taught {that a} packaged manufactured product has incorrect labeling have far more restricted choices in the present day and can’t merely repair the difficulty themselves.

#6 Hemp Bans

CDPH rule 40175(c) bans using hemp or CBD in hashish merchandise. The rule states: “A manufacturer licensee shall only use cannabinoid concentrates and extracts that are manufactured or processed from cannabis obtained from a licensed cannabis cultivator.” While the rule doesn’t say that it bans hemp on its face, in its final statement of reasons, CDPH defined:

Cannabis merchandise might include CBD derived from hashish. Proposition 64 particularly excluded industrial hemp and its derivatives from the hashish regulatory construction. Consequently, utilizing cannabinoids acquired from exterior of the regulated construction presents a threat of inversion of illicit hashish product into the authorized market and threatens the integrity of the track-and-trace system. In order to guard the extremely regulated nature of the hashish market, all cannabinoids should be acquired from licensed sources.

The CDPH’s rationale not holds any weight. Shortly after the foundations have been adopted, the state applied a hemp cultivation plan, and many others have adopted go well with. If the CDPH is worried that lawfully cultivated hemp is just not examined per the identical requirements as hashish, that concern is of no second as a result of the completed product would nonetheless in the end have to be examined earlier than going to market. There is not any actual purpose to proceed to ban using hemp-derived cannabinoids.

#7 Protracted Licensing

This final one isn’t a rule, however relatively the absence of a rule and one thing that might have been higher dealt with by California’s hashish statute, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). MAUCRSA requires candidates to safe native approval as a situation to getting a state license. Businesses needed to undergo lengthy native allowing processes previous to submitting a state license. Some cities present conditional approval that enable candidates to go get a state license partway by means of the native course of, however this nonetheless requires ready probably months to even apply for a state license (all of the whereas expending big quantities of sources on hire and different bills). Historically, this added a lot of time onto the method, although the state has gotten a lot quicker in issuing licenses. In hindsight (and for any states contemplating licensing sooner or later), permitting licensees to use on a twin observe directly would have saved numerous time.

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