The Cannabis Industry Has Mixed Reviews on California's New Rules for Legal Marijuana
California released emergency regulations governing its adult-use and medical cannabis program last week, and some are worried about the possible consequences.
Published on November 21, 2017

Image via Juanmonino

On Thursday, California officials released 276 pages of long-awaited regulations to govern the state's cannabis industry. With less than two months before the launch of the state's new adult-use cannabis program (along with new regulations for medical marijuana), the state of legal pot in California is, at best, a last-minute work in progress.

"I look at this as just a starting place," says Chris Conrad, court-qualified expert witness on cannabis. "The people who care about cannabis and want to make it work will, so I'm happy with it moving forward from here."

Here are just a few of the most basic regulations:

  • Adult-use customers can buy up to an ounce of bud, eight grams of concentrate, and six immature plants; medical patients can have up to eight ounces of cannabis.

  • Adult-use cannabis products or samples may not be given away for free.

  • Cannabis may not be delivered by drone or bicycle, only by enclosed vehicles.

  • Edibles will be capped at 10 milligrams of THC per serving; no product can have more than 100 milligrams in a single package.

  • Adult-use tinctures, concentrates, and topicals are capped at 1,000 milligrams of THC per package; the medical versions of these products may contain up to twice that amount.

  • Cannabis products may not contain nicotine, added caffeine, seafood, dairy (except butter), or alcohol (tinctures are an exception).

  • Products must be tested for passing levels of cannabinoids, pesticides, heavy metals, moisture, microbial impurities, solvents, and other chemicals.

With regard to manufacturing concentrates, the regulatory board has classified ethanol and CO2 as "nonvolatile solvents." According to Conrad, this is one of the best things about the regulations. "From a social justice point of view, this will keep a lot of people from going to prison," he says.

However, one problem with the regulations is that other businesses that are inherently unrelated to cannabis are using them as a cash cow, alleges Conrad. "For example, with the security industry in particular, we now see all this obscene over-regulation on security that has more to do with the fact that the companies that make security systems are marketing them to regulators than any real need." Another example, says Conrad, are the Teamsters, who before had never displayed active support for legalization; now the regulations give them an opportunity to dominate cannabis distribution.  

Over-regulation compromises the affordability of entering the industry. The more hoops small businesses need to jump through (and pay attorneys to help figure them out), the less they'll be able to compete with larger, better capitalized businesses. Moreover, the greater number of rules there are, the greater the opportunity to break a rule — which could draw the attention of the Feds. "The fewer rules the better," Conrad says. "That's fewer openings for the federal government to get into our lives."

Some of the regulations just don't make sense, he adds, such as disallowing bike deliveries, which contributes to pollution and excludes an option for low-income delivery businesses. "We're in a situation where we have a boomerang, throwing it toward legalization and regulation, hoping it will come back around for rationality and affordability," Conrad says. "I think it's just part of that process. The cannabis community is so creative, I don't think there's a single obstacle they won't overcome. They overcame the drug war; we won't find anything worse than that."

One of the greatest hurdles is the discrepancy between state and local regulations. "Municipal agencies need to step up and be ready," says Daniel Yi, director of communications at MedMen, a marijuana retail and management services company. Cannabis businesses need a local license before they can obtain a state license. If a local jurisdiction doesn't lay out its regulations in a timely manner concurrent with the state's timeline, then businesses in that region won't be able to operate. The second main issue is enforcement, adds Yi. If the state doesn't enforce these new regulations, then noncompliant businesses have a competitive edge over those paying lawyers to get licensed and follow the law. Legal businesses will already have to compete with the black market, given how high cannabis taxes are expected to be.

Lab testing is another hurdle, says Jamie Warm, co-founder and CEO of Henry's Original, a Northern California cannabis cultivator. "The sheer volume of tests, and the fact that the lab will have to send out their own personnel to a distribution center or field site to personally take a sample for testing, majorly affects the timeline and costs for production," he explains. "Some labs have estimated that it may cost $1,000 per panel, and take up to 30 days to process a batch of lab tests."

Ultimately, the small-batch cannabis cultivator may have it the hardest under the new regulations. For many small farmers, the most objectionable regulation is the removal of the "total acreage cap." Whereas under previous versions of the regulations, cannabis cultivation would have been limited to one acre (the average small-batch cannabis farm is 10,000 feet or less), fostering an environment wherein small farmers can operate sustainable businesses, removing the cap allows big business to enter the industry at a faster pace — making it more difficult for craft cultivators to compete.

"It's clear the governing body is taking the regulation part of things very seriously, as they should be, and it would be nice if there were a little more transitional support for members of the community, without whom this conversation wouldn't be as advanced as it is, thanks to the farmers and activists who made this happen," says Michael Katz, co-founder of the Emerald Exchange cannabis farmers market. "They're the ones responsible for this opportunity coming to light, and they're being left behind and steamrolled."

The inability for growers to share free samples with adult-use customers is another issue, he says. "I don't understand the need to separate the farmer or creator from the consumer; that transfer of knowledge [creates] conscious cannabis consumers." Only if a grower is also a micro-business can they give cannabis directly to the consumer — but again, even getting to that point is expensive and requires both state and attorneys fees to comply with that sort of license.

Not to mention, the taxes alone are expensive: $9.25 per dry-weight ounce of flower and $2.75 per dry-weight ounce of leaves. The cultivation tax applies to all of the harvested bud going into the commercial market, while cultivators themselves must pay the cultivation tax to the manufacturer or distributor, who then pays the California Department of Tax and Fee Administration. Meanwhile, an excise tax of 15 percent will be imposed on cannabis bud and product purchases. Point being, anyone entering the cannabis industry needs a good amount of starting capital to even compete, causing some to wonder if the Green Rush is about getting rich, or just getting richer.

"People have put their hearts, souls, lives, and everything they have into this, some for decades," says Katz, "and the collective goodwill that's gone into building this is not being acknowledged."

Madison Margolin
Madison is a New York/Los Angeles-based writer who specializes in cannabis coverage. Her work has been featured in Playboy, the LA Weekly, and other publications.
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