The cannabis industry is one of the fastest growing markets in the United States, especially in California where sales of cannabis is expected to hit $3.7 billion by the end of 2018 and grow to $5.1 billion in 2019. California is center of the cannabis industry and its largest market; and to further its status as a pioneer of the industry, the voters of the state recently enacted Proposition 64 legalizing recreational use of cannabis in addition to medical use.
Local and state commercial cannabis licenses are required to operate a legal cannabis business in California. A license must first be obtained from your local government. Once you are issued a license by your local government, you may obtain a state license to operate a cannabis business.
The Law Offices of Jayan Hong has helped cannabis businesses and potential investors with licensing and compliance since 2011. We offer the following services:
– Assistance with cannabis license applications and the application process
– Acquiring currently existing licenses
– Compliance with local and state laws for current license holders
– Business contracts
In 1996, the voters of the State of California legalized cannabis for medical purposes by enacting the Compassionate Use Act of 1996 (CUA). The purpose of the legislation is, among other things, to: (1) ensure that “Californians have the right to obtain and use marijuana for medical purposes”; (2) ensure that “patients and their primary caregivers who obtain and use marijuana for medical purposes upon the recommendation of a physician are not subject to criminal prosecution or sanction”; and (3) “encourage the federal and state governments to implement a plan to provide for the safe and affordable distribution of marijuana to all patients in medical need of marijuana.”
In 2003, the California Legislature went further and enacted the Medical Marijuana Program Act (MMPA) which permitted qualified patients and their primary caregivers to associate collectively or cooperatively to cultivate medical cannabis without being subject to criminal prosecution. MMPA’s allowance of collective and cooperative cultivation projects allowed for commercial cannabis activity throughout California. However, the MMPA did not explicitly regulate the manner of conduct for commercial cannabis activity.
Per MMPA, the California Legislature enacted California Health and Safety Code Section 11362.83, which encouraged local governments to regulate cannabis activity through local ordinances. Ten years later, the California Supreme Court affirmed the authority of local governments to regulate medical marijuana. Specifically, the Court held in City of Riverside v. Inland Empire Patients Health & Wellness Ctr., Inc. (2013) 56 Cal.4th 729 that neither the CUA nor the MMPA “preempts the authority of California cities and counties, under their traditional land use and police powers, to allow, restrict, limit or entirely exclude facilities that distribute medical marijuana, and to enforce such policies by nuisance actions.”
On October 9, 2015, the California Legislature adopted three bills, AB 266, AB 243, and SB 643, collectively referred to as the “Medical Marijuana Regulation and Safety Act” (MMRSA), which established a comprehensive statewide regulatory structure for commercial cannabis activity. Unlike the MMPA, which only provided persons conducting commercial cannabis activity a defense in court, the MMRSA affirmatively permits the licensing of commercial cannabis activity conducted in accordance with local ordinances and State laws.
Among other things, the MMRSA also established state licensing regulations for retail sales, cultivation, manufacture, transport, distribution, delivery, and testing of all medical cannabis. The MMRSA went into effect on January 1, 2016. However, the State will need until January 2018 or longer to implement these regulations. The MMRSA gives the ultimate authority of licensing to local cities. Local cities may implement their own licensing regulations in addition to the state regulations.
The MMRSA clarifies what cities can and cannot regulate concerning commercial cannabis activity in California. Under the MMRSA, local cities may issue licenses for retail, cultivation, manufacturing, distribution, testing, transportation, and nursing of cannabis, for medical and/or adult use.
Finally, on November 8, 2016, the residents of California voted to approve the Adult Use Marijuana Act Initiative (the “AUMA”). The AUMA utilizes the MMRSA to regulate the adult use of cannabis without a physician’s recommendation. It also decriminalized the recreational use of cannabis and reduced the consequences and penalties for many cannabis related crimes.