Cultivating Community in a City Near You: Announcing NCIA’s 2023 Event Calendar
It’s been a year of big change for NCIA. As we come to the end of 2022, we want to take a moment to send a message to our members and supporters about these changes, and most importantly, get excited for what’s next for the future of NCIA events.
The End of An Era
The events industry has faced unforeseen challenges these last couple of years, and NCIA was not isolated from these issues. Outside of needing to postpone our large tradeshows until late 2021, we also had to postpone a whole calendar of approximately 40+ events nationwide which was our primary way of connecting our community and meeting with our members face to face. Our team overcame these challenges by building our expansive digital presence and online events program to continue to provide education and exposure opportunities to our members, however this did still require a significant pivot in organizational strategy. Due to the residual hardships brought by the pandemic, we learned earlier this year that the Cannabis Business Summit & Expo was not going to be able to be produced on the scale or quality that we or our members had come to expect throughout the years. So, in tandem with our previous tradeshow co-producers, we made the difficult decision to dissolve our existing partnership and accepted an offer from them to acquire our tradeshow portfolio. For those who have been attending our tradeshows since 2014, we can’t thank you enough for your participation in those events and making them so impactful for the industry. There are too many good memories to revisit, and hope you take a moment to remember some of your personal highlights throughout the years as we look forward to coming together for new events in 2023.
Looking Ahead to 2023
For now, we will be taking a hiatus from the tradeshow space. This will allow our team to refocus our efforts into other impactful networking and educational opportunities. We’re excited to get back to our roots and focus our efforts on intentional and innovative gatherings that connect Main Street cannabis businesses with each other and with NCIA’s advocacy efforts.
We’ve listened to the feedback from our members, and know that in-person networking remains essential to building your business and growing your network. In these uncertain economic times, every dollar spent and any time away from your business impacts your bottom line. As the leading cannabis trade association representing small-business owners, we’re committed to making the investment to meet our members where they are, and to continue facilitating experiences where our members can make key connections with fellow business owners. Moving into 2023, we’re reinvigorating our events program starting with our regional Industry Social and Cannabis Caucus event series, leading into the cannabis industry’s biggest policy and advocacy event of the year: NCIA’s 11th Annual Cannabis Industry Lobby Days.
We invite you to move forward with us as we enter a new chapter in our history. Without further ado, we are excited to announce the lineup of events for the first half of 2023!
Join NCIA to Take Advantage of Complimentary Tickets
As always, NCIA members receive complimentary access to all of these events based on membership level. Looking to have an expanded presence at each event? Consider upgrading your membership today in order to include your entire team or prospective clients.
Huge thanks to the initial sponsors of these events which have made a significant investment in NCIA’s community building efforts moving into 2023! Learn more about each of these pioneering businesses helping drive our mission forward and reach out to schedule a meeting with their team surrounding the upcoming events.
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Support These Events Through Sponsorship
Has your company had trouble breaking through the noise on a crowded expo floor this past year? Is your brand looking for quality B2B connections with market leaders? Want to play a larger role and align your business with NCIA’s community building and educational efforts?
Consider one of our affordable sponsorship packages, starting for as low as $500, which will allow you to reach thousands of leading cannabis businesses while supporting NCIA’s advocacy work on behalf of small cannabis businesses. Contact our team at sponsorship@thecannabisindustry.org to learn more.
There has been a steady movement for the decriminalization of cannabis worldwide. Many organizations call for their governments to allow recreational and medical cannabis, and it’s hard to deny how valuable the cash crop can be for the local economy. Learn how some cannabis brands are contributing to decriminalizing cannabis and making an impact.
As it stands, 19 U.S. states have fully legalized cannabis, and another 19 have medical marijuana programs. While this is fantastic progress, it’s still leaving many people convicted of drug crimes, medical patients, and minorities behind. While some places go the extra mile, there are still many places where it’s a punishable crime with the smallest amount of cannabis. Cannabis laws continue to evolve to protect users, such as the new California law that protects employees from smoking outside work hours.
A bill to decriminalize marijuana passed in the U.S. House in April, but there’s not a lot of hope that Congress will take it up. However, the fact that it was proposed shows that recreational and medical cannabis is becoming closer to the mainstream.
Global Cannabis Decriminalization
Canada, Mexico, South Africa, Thailand, and Malta have legalized adult-use cannabis. The list is relatively short and shows that there’s still progress worldwide.
It’s become clear that many think it doesn’t make sense for people to go to prison for cannabis possession. Programs have been set up in most states and some countries to expunge cannabis possession records and free people who are locked up unjustly.
Here’s a quick introduction to some of these programs and how states, businesses, and individuals push cannabis decriminalization and legalization forward.
States Create Social Equity Programs
A common critique of the cannabis industry is that it’s dominated by white people who were never negatively impacted by anti-marijuana laws. Social equity programs in many states are working hard to level the playing field.
While each state has different qualifications, eligible people must live in an area strongly affected by high arrest and imprisonment rates for cannabis activity. Applicants might also receive extra assistance if they were arrested or convicted of marijuana crimes before legalization.
Some businesses also offer reduced product prices, grants, and loans for cannabis enterprises founded using social equity programs. This makes it easier for minorities to get the funding they need to start the industry.
Programs To Help Minorities with Cannabis Jobs
Not everyone who wants to get involved in the cannabis field is interested in running their own business. Some organizations are also making it easier for people of color to find jobs in the field.
The Minority Cannabis Academy is a New Jersey program that helps young Black Indigenous people of color find their vocation in the cannabis industry. It trains them to work as budtenders in existing dispensaries, giving them a leg up for employment.
In Illinois, cannabis companies can expedite their application for a license if the majority of their staff has been convicted of a cannabis-related offense in the past. This incentivizes businesses to hire minorities and people who need help from these programs.
More programs like these should be developed nationwide if we want a positive representation of BIPOC in the cannabis industry.
Grants Given to Provide Legal Assistance for Expunging Nonviolent Cannabis Crimes
Having a marijuana conviction on your record can have lasting consequences. Drug convictions come up in background checks, and since they carry a significant stigma, people can lose out on employment opportunities when a company judges them harshly for their past.
A cannabis conviction can also make it difficult to rent an apartment or buy a home. Plus, people with drug convictions have been denied student loans and other loans from financial institutions.
When Illinois legalized cannabis in 2019, it was important to lawmakers that people who were convicted for marijuana crimes previously were able to clear their records.
An excellent organization focused on eliminating people’s cannabis records called the Illinois Equal Justice Foundation is taking a step forward. They will award over $1.4 million in grants spread throughout 18 organizations in the state to help rid people of their cannabis records. The funding will assist legal aid groups, so they can represent people in court and are committed to educating people about their expungement options.
Thailand has pushed its efforts even further. When the country delisted cannabis as a narcotic in June, they also released 3,071 inmates who had been convicted of cannabis-related crimes.
Canada has issued pardons for people with previous marijuana convictions for several years. The process can be slow, but the government feels strongly that these people should be released, and their records wiped clean.
These models show that it’s possible to legalize marijuana while still caring for people whose criminalization has been negatively impacted. Experts are hopeful that President Biden will free individuals in jail for marijuana possession, but the future in the United States remains unclear.
How Brands Can Help Impact Positive Change In The Right Direction
King Palm is a cannabis smoking accessory brand that has created a Last Prisoner Project rolling tray to help spread awareness of that non-profit organization.
This cannabis smoking accessory brand is donating to the Last Prisoner Project. This nonprofit organization is committed to freeing people convicted of marijuana-related crimes.
The organization works hard to advocate for bills that would free people from prison for marijuana offenses, and once people are freed, they help them integrate back into their communities.
Expungement Assistance
Many states are setting up expungement assistance programs that anyone can access. The process can take time and be confusing, but many people find it extremely worthwhile.
In 2021, Michigan passed the Clean Slate Act, which expanded the types of crimes that can be expunged. Some expungements will even be automatic under the law. The state says hundreds of thousands to millions of people are now eligible for their criminal records to be wiped clean.
Another strong member of the National Cannabis Industry Association is Cannabis Equity Illinois. They help community members expunge or seal their criminal records for cannabis and also advocate for automatic expungement. They also provide Know Your Rights seminars, so no one is criminalized for cannabis use.
Looking for help expunging your legal record with cannabis? Many areas have expungement events, and you can find exactly what you need to do on your state’s website.
Support for cannabis decriminalization is growing, but there’s still a long way to go. Luckily, many governments, businesses, and nonprofit organizations are doing their part to make cannabis mainstream and help minorities make their way up through the budding industry.
Mack Bush (they/them) is a freelance writer who is passionate about sharing the joys of cannabis with the world. They manage their fibromyalgia with medical marijuana, and it’s opened up new doors and improved their quality of life. They live in Grand Rapids, Michigan with their cats, Rigatoni and Jasper. Find out more about their work at mackbush.com.
King Palm is one of the leading cannabis companies in the world for joint wraps, pre-rolled cones, and rolling papers. Their specialty palm wraps are made from Cordia leaves and allow you to get in touch with nature while you smoke. They also create quality smoking accessories, including electronic devices like concentrate vapes and nectar collectors, as well as lighters, rolling trays, grinders, and ashtrays. Find out more about their products at kingpalm.com!
Committee Blog: Cannabis Lounges – Coming to a City Near You?
Although the concept of state-legal cannabis has been around in some shape or form since 1996, cannabis remains illegal to consume in most public places. In other words, legal cannabis consumption remains relegated to back alleys, derailing efforts to “normalize” cannabis use. Tourists visiting popular cities where weed is legal are caught in the unenviable Catch-22 of being able to purchase, but not publically consume, the product. And those who attempt to use cannabis in public still face criminal penalties in some states, with minorities three times more likely to be targeted for arrest, perpetuating racial disparities at a tremendous social cost.
Enter the cannabis lounge. Cannabis lounges — also known as “consumption lounges,” cannabis cafes, or some variation on that theme — are in simplest terms the cannabis equivalent of a bar or restaurant. Depending on state and local regulations, lounges offer users the chance to congregate in a public place and smoke a joint, try out a $500 gravity bong, or sip on a cannabis drink. With any luck, consumers may enjoy their cannabis with a snack or dinner, but mixing with alcohol is typically not allowed.
As with any “new” risks, some cities, states, and insurers are… concerned. Despite some obvious tax and social benefits, detractors cite a host of reasons to prevent lounges from coming to a city near you, including at the forefront: fears of public nuisance (odors, theft, and disruption) and overconsumption — especially because most states insulate cannabis cafes from liability for harm caused by obviously intoxicated or underage users, unlike dram shop laws for alcohol.
As another NCIA member recently pointed out, even in states that do allow cannabis cafes, regulatory bodies continue to struggle with how to shape the laws and regulations governing lounges to afford adequate consumer protection while allowing businesses to thrive. Moreover, without a better understanding of the regulatory landscape, some insurers — whose business model hinges on the ability to accurately price a risk — may be unwilling to play in this new cannabis lounge market.
A Sampling of State Approaches to Cannabis Lounges
Alaska led the country in 2019 in licensing on-site consumption. A handful of states and localities have followed Alaska’s guide, and more are anticipated to join this year, including Michigan and New York. We compare a few regulatory schemes below and also consider the impact of dram shop legislation on risks faced by the industry.
California
California, governed on the state level by the Medicinal and Adult Use Cannabis Regulation and Safety Act, delegates to localities the right to open consumption lounges. Put simply, cities have to affirmatively “opt in” to allow lounges. With a few contingencies — including that patrons must be 21 or older and no alcohol or tobacco can be sold on premises — “a local jurisdiction may allow for the smoking, vaporizing, and ingesting of cannabis or cannabis products on the premises of a” licensed retailer. SeeBPC § 26200(g).
To date, only a few localities have opted in to allow cannabis lounges, including San Francisco, Oakland, and Palm Springs. West Hollywood, in efforts to create an epicenter for canna-tourism, plans to allow up to 16 lounges within its jurisdiction. Because state law provides little regulatory guidance for lounges, localities generally provide more specific guidance. As an example, West Hollywood’s local municipal code requires security guards on site, as well as within a two-block radius surrounding the business during operation, and allows the sale of cannabis to an individual “in an amount reasonable for onsite consumption.” West Hollywood Municipal Code §5.70.041. Only one lounge is currently open in West Hollywood, the Artist Tree’s Studio Cannabis Lounge, which offers not only lounge access but cannabis yoga, live music, and comedy shows, along with a revolving selection of local art. The Woods, another West Hollywood dispensary with a soon-to-open courtyard lounge space, is also slated to open in 2022.
Although California law significantly limits third-party liability for alcohol-related accidents, it does not afford cannabis owners the same protection. For example, California Civil Code §1714explicitly states that furnishing alcohol “is not the proximate cause of injuries resulting from intoxication,” which has essentially absolved bars, restaurants, party hosts, and most others of potential liability for selling or furnishing alcohol to customers and guests with an exception for liability arising from the furnishing of alcohol to an “obviously intoxicated minor.” SeeCalifornia Business & Professions Code § 25602.1. Without similar protections for cannabis lounges, injured parties could attempt to sue under a negligence theory if a business or employee serves an intoxicated patron who causes harm.
Colorado
As of January 1, 2020, local jurisdictions in Colorado can opt-in to the state’s cannabis hospitality business license regime (Colo. Rev. Stat. § 44-10-609), and as of March of 2022, the City of Denver has approved cannabis hospitality businesses for operation. Denver operators include the first social equity applicant in Denver approved for a hospitality license, the Tetra Lounge, although from its website Tetra Lounge’s website describes itself as “a private lounge,” requiring a monthly or annual membership fee and a liability waiver to gain access.
As to dram shop liability, although Colorado law authorizes damages against a licensee for willfully and knowingly selling or serving alcoholic beverages to a visibly intoxicated person, the Colorado Legislature caps liability at $150,000 (Colo. Rev. Stat. § 12-47-801 (3)(II)(c)). This damages cap improves (i.e., reduces) the ISO hazard grade, resulting in the improvement of insurance options available for liquor liability. The legislature has not adopted the same or a similar damages cap on liability for cannabis consumption establishments.
Nevada
In June 2021, Nevada’s Governor signed Assembly Bill 341 into law, authorizing the Nevada Cannabis Compliance Board (“CCB”) to license and regulate consumption lounges across the state, subject always to local approval. The State plans to issue up to 65 lounge licenses (40-45 for lounges attached to existing dispensaries, 20 for independent lounges) with 10 reserved for social equity applicants.
Most recently, on June 28, 2022, the CCB voted to unanimously approve a host of regulations for cannabis consumption lounges. Nevada’s extremely detailed state regulations prohibit the sale of “single use cannabis products” with more than 3.5 grams of “usable cannabis” and 10 mg of THC for edibles; prohibit the removal of any cannabis products from a lounge; require a mitigation plan for impaired driving and detailed employee training for overconsumption; and require consumer education and warnings to customers, among other things. As with other states, Nevada allows local jurisdictions to prohibit consumption lounges and to implement more stringent regulations than state law.
Unlike other states, however, Nevada law carves out protections for cannabis lounge operators just as it does for alcohol. Nevada law already protects businesses that serve or sell alcoholic beverages from injuries inflicted by an intoxicated person. And while any person who knowingly furnishes an alcoholic beverage to any person under 21 years of age is guilty of a misdemeanor, the law provides only for criminal penalties, not civil liability. The Nevada Supreme Court has repeatedly refused to impose responsibility on vendors selling alcohol absent a legislative provision. SeeSnyder v. Viani, 885 P.2d 610 (Nev. 1994) (holding consumption is the proximate cause of alcohol-related injuries and dismissing the negligence claim against a tavern owner for alcohol service). The same rules will apply to cannabis operators.
Illinois
Over two years after full legalization of adult-use commercial cannabis in Illinois, cannabis lounges in Illinois are still relatively rare, with the first Chicago-area marijuana consumption lounge opening on April 20, 2022. Like other states, the State of Illinois does not directly license lounges, but it allows local governments to opt in.
Illinois creates a cause of action against sellers for injury by an intoxicated person. § 235 Ill. Comp. Stat. 5/6-21. The standards for liability under the Illinois dram shop law include: (1) sale of alcohol to any person who, while intoxicated, causes injury, and (2) any person owning, renting, leasing, or permitting the occupation of any building or premises with knowledge that alcoholic liquors are to be sold therein, severally or jointly, along with the person selling or giving liquor. In Illinois, the Dram Shop Statute provides the exclusive remedy for alcohol related injuries. See Charles v. Seigfreid, 65 NE.2d. 154 (Ill. 1995). The Statute also provides stringent limitations on recovery of damages. There is no equivalent in Illinois for cannabis entities.
The Takeaway for Business Entities and Insurance Providers
As with cannabis law generally, lounge operators face a patchwork of state and local regulations that vary tremendously by jurisdiction. In most places, cannabis lounge owners are not protected by dram shop/gram shop laws that otherwise insulate bars and restaurants from liability for overconsumption. This means that companies must be vigilant in protecting themselves from liability by instituting compliance and risk-management procedures.
In some instances, such as California’s West Hollywood, which has far fewer safeguards and guidelines than Nevada, operators are largely left to their own devices in implementing adequate risk transfer and risk management, compliance, employee training, and consumer education to limit risk of liability. While the West Hollywood municipal code requires lounges to limit cannabis sales of cannabis “in an amount reasonable for onsite consumption,” the “reasonableness” standard is rife with ambiguity and could lead to disputes regarding liability and assumption of risk if a patron overconsumes.
Evaluating and preventing overconsumption and intoxication will be particularly difficult for cannabis when: patrons have varying experience levels with cannabis; products can be sold in more than a single serving, and no specific consumer education is required. Thus, even in locations that have more stringent regulatory oversight, companies would be wise to consult with experienced counsel and consultants to avoid or limit potential risks associated with regulatory uncertainty, civil liability, and government penalties for non-compliance.
This brings us full circle to the question of insurance. Even in the states that allow consumption lounges, very few insurance companies provide coverage for on-site consumption (although some do). If an exclusion prohibits coverage, the company may not have coverage for important and sometimes catastrophic events, such as property damage by fire, theft/robbery, cyber events, sexual harassment or discrimination claims by employees or others, and bodily injuries to, or caused by, patrons (on and off premises).
Most existing property, general liability, products liability, and other insurance policies — including those written for the cannabis industry — expressly exclude coverage for on-site consumption or bodily injury caused by intoxication. In fact, some existing cannabis insurance companies include a “health hazard” exclusion in their policies, which exclude coverage for any bodily injury arising in any way from the use of cannabis, including any health injury. Cannabis insurance policies may also exclude coverage for intentional or illegal acts, which some insurers may try to apply to any claim involving cannabis on the basis that the sale of cannabis violates federal law (the Controlled Substances Act), even if it is state legal.
For current licensees that are planning to open an attached or adjacent consumption space, current insurance policies may not cover injuries arising in the lounge space. Further, any failure to identify a change in business type could prompt an insurance carrier to deny coverage for subsequent claims based on a theory of misrepresentation.
In closing, cannabis owners should attempt to negotiate separate and/or broader coverage that carves out coverage for their cannabis-related activities, including on premise consumption, with their current insurer or seek to obtain coverage from a different carrier. Experienced insurance coverage counsel can assist with identifying reputable insurance brokers and negotiating policies that provide such coverage. Because of the limited options, companies would be wise to begin the process of identifying experienced insurance coverage advisors at the beginning of their licensing journey.
Across the Country – State Cannabis News and Movement
by Madeline Grant, NCIA’s Government Relations Manager
As the deadline to submit feedback for the Cannabis Administration and Opportunity Act approached last week, our Government Relations team worked tirelessly to submit a detailed analysis and recommended improvements on behalf of the legal cannabis industry. The full comments and an executive summary can be downloadedhere.The Cannabis Administration and Opportunity Act (CAOA), submitted in July by Majority Leader Charles Schumer (D-NY) and Senators Cory Booker (D-NJ) and Ron Wyden (D-OR), would remove cannabis from the schedule of controlled substances, create a regulatory structure and federal guidelines for cannabis products and state-legal markets, and is intended to support restorative justice for the people and communities that have been disparately hurt by prohibition while ensuring fair opportunities in legal cannabis markets for small businesses and marginalized communities.
The introduction of the comprehensive draft language was a pivotal moment for the United States Senate and NCIA will continue to do whatever we can to ensure value-driven policies for the cannabis industry. Meanwhile, we continue to see movement at the state level as support for cannabis legalization efforts continues to grow. Here are some important updates happening at the state level.
California
California officials announced that they are soliciting proposals for a program aimed at helping small marijuana cultivators with environmental clean-up and restoration efforts. The California Department of Fish and Wildlife’s (CDFW) Cannabis Restoration Grant program will release applications this fall and remain open through spring 2023. The $6 million in potential funding, which comes from cannabis tax revenue, must go to government agencies, California nonprofits, or Native American tribes who would then work with cultivators on environmental efforts.
New York
The newly inaugurated governor of New York says she wants to “jumpstart” the implementation of cannabis legalization. Governor Kathy Hochul took a major step by making two key regulatory appointments to oversee the state’s cannabis market. Soon after they were quickly confirmed by the Senate during a special session. Former New York Assemblywoman Tremaine Wright (D) will serve as chair of the Cannabis Control Board, and former Drug Policy Alliance (DPA) staffer Christopher Alexander will be the executive director of the state’s Office of Cannabis Management.
Ohio
Ohio activists can begin collecting signatures for a 2022 ballot initiative to legalize marijuana in the state. The Coalition to Regulate Marijuana Like Alcohol (CTRMLA) launched its ballot effort last month. The new initiative is a statutory proposal and if supporters collect 132,887 valid signatures from registered voters, the legislature will then have four months to adopt the measure, reject it, or adopt an amended version. In the case of lawmakers not passing the proposal, an additional 132,887 signatures will be required to place the proposal before voters on the ballot in 2022.
Missouri
Another adult-use legalization proposal has been filed. Legal Missouri 2022 submitted the latest measure to the secretary of state’s office, and it will now go through a review period before potentially being certified.
New Mexico
The Cannabis Control Division announced applications are now open for businesses interested in legal cannabis producers licensed by the state of New Mexico. After an application is submitted, regulators will have 90 days to issue a determination.
Colorado
Colorado voters will decide on an initiative in November that would raise cannabis taxes to fund programs that are meant to reduce the education gap for low-income students. The secretary of state confirmed that the campaign behind the measure collected more than the required 124,632 valid signatures to make the ballot. The measure would give low and middle-income families a $1,500 stipend to have school-aged children participate in afterschool programs, tutoring, and summer learning programs.
As states continue to legalize medical and adult-use cannabis, be sure to check out our state policy map for updates. Our Government Relations team will continue to educate congressional offices as states move forward. It’s vital to have accurate information and resources for members and Congress and staffers on Capitol Hill. With advancements at the state level, we continue to relay the importance of cannabis legalization at the federal level. Please stay tuned for more updates from our Government Relations team.
In thriving cannabis markets, demand exceeds supply. For successful cultivation businesses, expansion is the logical next step — either through organic growth or the acquisition of operational cultivation assets. Before moving forward with an expansion project, entrepreneurs should carefully determine when is the appropriate time to expand. There are a number of market indicators that can help entrepreneurs decide if expansion is right for them — such as market demand, growth of market, and the potential for adult-use sales.
Current market demand for your product
What is the overall market demand for cannabis, and, more importantly, what is the demand for the cannabis that you cultivate? The answers to this question should be reflected in your sales volume and price point, and it should help influence a company’s decision on whether or not to expand. If you’re wholesaling your product to dispensaries for re-sale, or to large oil extractors of raw cannabis biomass, are you currently selling everything that you grow? Are customers calling you looking for product before it’s even harvested? Or, are you spending hours on the phone trying to unload product before the next harvest? How does your product sell at the dispensary, compared to your competitor? Does it fly off the shelf or frequently find itself discounted as the weekly special?
The price at which you’re selling your dried cannabis flower should be an excellent indication of whether or not expansion makes sense. Do you spend much time haggling over money, or can you name your price? In hot new markets, where there are few suppliers and great demand, wholesale cultivators can charge up to $4,000 per pound for indoor-grown cannabis. In more seasoned markets with multiple cultivators, wholesale prices are closer to $1000 to $1500 per pound. The closer your sales are to $4,000 per pound, the more it makes sense to expand.
Figure 9.2 Wholesale prices across the U.S. as of April 2020. Copyrighted by Marijuana Business Daily, MJBizDaily.com. Used with permission.
Size and growth of market
The size and growth rate of a medical cannabis market is a good indicator of whether or not a business should consider expanding. In regions with a medical cannabis program, the percentage of the adult population registered as medical cannabis patients is an excellent indicator of the current size of the medical market. However, a cannabis business considering an expansion should be less concerned with how big the market is today, and more focused on how large it may be tomorrow instead.
In most U.S. states, about two percent of the adult population become medical cannabis consumers. A rate of lower than one percent is rare. This typically occurs when there are few doctors willing to prescribe cannabis, or there’s a very restrictive list of medical conditions for which cannabis can legally be prescribed. In Oklahoma, more than seven percent of adults are registered cannabis patients, while in Ohio only 0.6% of the adult population have registered as medical patients. If the percentage of adult medical patients in your area is above two percent, it’s a good sign that the medical cannabis industry is thriving. Markets with more patients are more attractive for cultivators to expand.
Figure 9.3 The top three and bottom three U.S. medical cannabis markets by percentage of registered adult patients. Source: Marijuana Policy Project
The rate of new patient registrations is a much better indicator of a given market’s potential for growth. Single-digit increases in new patient registrations year-over-year are not positive indicators. Cultivation businesses considering expansion want to be in states where the number of medical patients is increasing by at least twenty percent annually. This kind of growth would indicate a widespread adoption of medical cannabis and few barriers to receiving a medical cannabis prescription. Florida is an example of a thriving medical cannabis market, where patient registrations increased fifty percent during 2019 alone to over 300,000 patients.This kind of positive growth gives cultivation businesses a good reason to expand.
Competition
However, a robust cannabis market may not make the best expansion opportunity if there are numerous cultivators competing for the same customer base. California and Colorado are established cannabis markets — both medical and [adult-use] — servicing millions of customers each year. That’s exactly the reason expanding in those states may not be as lucrative as opportunities presented by less populated states. In 2019, California sold an estimated $3 billion in recreational cannabis — but there are nearly 3,000 licensed recreational cultivators in the state. In saturated cultivation markets, wholesale flower is quickly relegated to a commodity. Large, established markets, like California and Colorado, don’t hold the same potential value for expansion as a state that may have fewer consumers but is on the cusp of legalization.
Competition doesn’t only come from other licensed commercial cultivators, but from caregivers as well. Caregivers are home growers that are permitted to cultivate plants for medical cannabis patients. Consumers appreciate the personal touch that caregivers offer their clients, and the growers have more flexibility on pricing than do dispensaries. In medical markets, a thriving caregiver industry can seriously hamper retail dispensary sales and lessen the need for wholesale cultivators to supply them. Cultivation businesses should be cautious of expanding into markets with a strong caregiver presence. Coupled with competition from other commercial cultivators, this may not be as lucrative an expansion opportunity as other markets without such a caregiver network.
Adult-use cannabis is coming
The biggest influencing factor for cultivation companies considering expansion should be impending adult-use legislation. Servicing adult-use markets is much easier and more profitable than servicing medical cannabis markets. There are no patients, doctors, or prescriptions involved, and there’s a robust customer base on the very first day of sales. There is no need to develop a demand for recreational cannabis, because it already exists — everywhere! It’s only a question of transitioning paying customers from the illicit market to the legal market.
The ideal situation for expansion is a cannabis business operating a cultivation facility in a medical cannabis market where there’s good reason to believe there will be a transition to recreational cannabis soon. Medical dispensaries are often the first to receive permission to commence recreational sales, since they already have the infrastructure and processes in place. However, these dispensaries never have enough product to meet demand. In an attempt to protect their medical patient base, most fall woefully short of supplying the adult-use market. Expanding cultivation activities in anticipation of recreational use can place a cannabis business in an excellent position to service this new market.
This situation can be even more lucrative if the state that legalizes recreational sales is bordered by states with only medical cannabis laws, or no cannabis legislation at all. Adult-use stores sell to individuals from out of state that are 21 years of age or older, and cross-border traffic contributes substantially to a state’s total recreational cannabis sales. In the first four months of Illinois’ recreational cannabis program, transactions from out-of-state customers accounted for twenty percent of total state sales.
Excerpt from From Seed to Success: How to Launch a Great Cannabis Cultivation Business in Record Time by Ryan Douglas. Douglas is founder of Ryan Douglas Cultivation, a cannabis cultivation consulting firm. He was Master Grower from 2013-2016 for Tweed, Inc., Canada’s largest licensed producer of medical cannabis and the flagship subsidiary of Canopy Growth Corporation.
Member Blog: A COVID-19 Guide For Cannabis Entities
As the fallout from COVID-19 ripples through the economy, cannabis businesses are once again faced with a plethora of conflicting information and uncertainty. As counsel to the NCIA and in service to its membership, Wykowski Law has put together a guide to the most common issues facing cannabis businesses in the wake of COVID-19. The guide focuses on national issues and focuses in on some issues specific to California.
Please check out the guide for more details, but here is a quick rundown of what you need to know as a cannabis business in the age of COVID-19:
As we’ve unfortunately become accustomed to, cannabis has largely been left out of relief efforts, particularly where the federal government is concerned. Like with anything cannabis, this means that we have to dig deeper and be more creative to survive.
What sort of help can cannabis businesses get from SBA, PPP, and EIDL? Are there alternatives?
Generally, the Feds are not going to let MRBs touch these funds. But don’t despair. There are potential alternatives at the state level (in California at least) including CalCAP, IBank, and JSLP. Of course, these programs present their own challenges for MRBs, but they do not categorically rule out lending to the cannabis industry.
What about taxes and tax relief?
Unfortunately, when it comes to the Feds we continue to live under the spectre of 280E which makes so many of the tax credits and relief potentially unavailable. There may be some strategies to take advantage of some of these programs, but they are largely dependent on your individual situation. Check with your tax expert!
Some of these regulations just aren’t practical during a pandemic. Are we really expected to comply?
There’s good news and bad news on that front. In California regulatory agencies are making some allowances including regulatory variances and allowing curbside pickups. But you have to get approval. Double (and triple) check what sort of regulatory relief your state is offering before deviating from any SOPs.
The bad news is that as an essential service in the age of COVID-19, many cannabis businesses are subject to additional health and safety requirements. California OSHA for instance has put out stricter standards for all businesses and we expect there might be more to come due to the nature of cannabis.
Times are tough, but not hopeless. And, all of the above is just the tip of the iceberg. The full guide goes into deeper detail. Of course, the information you obtain here and in the linked guide is meant to be informational only and is not, nor is it intended to be, advice legal or otherwise. For that you will need to talk to your lawyer and/or accountant.
Henry Wykowski is the founder of Wykowski Law a national cannabis law firm based in San Francisco that has represented the industry since its inception and successfully defended it in multiple landmark cases.
Committee Blog: Ending The Ban On Interstate Commerce (Part 1)
Oversupply and shortages, high prices and lack of choice for patients and consumers, illicit markets, tainted products, and the inability to access banking and capital all plague the burgeoning cannabis industry. While cannabis advocates and industry leaders are working on each of these problems, there is one solution that would ease the burden on all of them. Allowing for interstate trade between states with legal cannabis markets would improve each of these issues while supporting the individual solutions to each that the industry has been working on. This is the first post in a series that explores the benefits and barriers to setting up a legal framework for interstate trade, even before wholesale legalization at the federal level.
Since the beginning of legal, adult-use cannabis, when Colorado and Washington passed the first ballot measure allowing for adult-use, the industry was guided by the Cole Memo, which laid out the parameters for the federal government staying out of the states’ cannabis experiments. Among other things, the Cole memo stated that the DEA could crackdown on cannabis moving from states with well-regulated systems to states that do not allow cannabis. This statement has been interpreted conservatively to mean that no cannabis should cross state lines for any reason, ever, based on the fact that at the federal level, cannabis is still a Schedule I drug under the Controlled Substances Act.
Today, there are 10 states which have legalized adult-use, another 19 which allow for medical use, and six more which allow the use of CBD products only. Many of these states share borders, and producer states could serve several nearby markets without ever entering a state that does not allow cannabis in any form. Furthermore, the Cole Memo, which was rescinded by Jeff Sessions in 2018, has not been replaced by any guidance whatsoever. This means that each U.S. Attorney’s office is free to set their own enforcement priorities around state-legal cannabis activities, and there is no official overriding policy at the DOJ on interstate trade between states with medical or adult use. Corresponding guidance from FinCEN, however, remains in effect and similarly discourages the transfer of cannabis between states.
Cannabis markets vary widely from state to state with regard to the underlying market dynamics and challenges that they face. Some states produce too much while other states experience shortages. Meanwhile, new states pass legislation or have voter initiatives that allow medical or adult-use every year without any infrastructure in place to supply that state’s demand. In each new legal market, the vast majority of demand had long been met through illicit market supply, and generally from outside of the state’s boundaries.
The artificial boundaries around cannabis markets have far-reaching impacts for local economies, patient access, illicit market activity, and social equity. Later posts in this series will take a deep dive into each of these issues, and in this post, we will look at how this has impacted states, the industry, and consumers so far.
Lessons Learned:
Washington State chose to take the strictest possible reading of the Cole Memo, and insist that not only must cannabis not cross state lines but also sources of funding must come from within the state. Combined with their high capitalization requirement for licenses, the result was a disaster from an equity standpoint: only wealthy and well-connected individuals in the state (which are overwhelmingly white males) were able to even attempt a license. This decision was based substantially on the fact that interstate trade was not allowed.
In Oregon, which has an ideal growing climate and a long tradition of exporting cannabis (albeit in the illicit market), the artificial boundaries created by the ban on interstate trade lead to a massive oversupply for its small population, which crippled the industry and tanked many small businesses. Despite the fact that Oregonians consume more cannabis per capita than any state, their climate and culture have led to growing massive quantities of world-class cannabis that cannot reach patients and consumers, even in neighboring states that might have under-supply issues. The result is that hundreds of small, mom-and-pop shops and family farms have gone out of business, eradicating millions of dollars of local capital, and accelerating mass consolidation of the industry into the hands of a few foreign corporations. Meanwhile, in medical markets like Illinois and Michigan, patients have had sporadic access to quality cannabis-based medicines.
When Nevada originally launched, due to the influence of local liquor distributors, it was almost impossible to get products to market, and the state’s dispensaries sold out on the first day of sales. After ironing out some of the kinks, sales are going strong, but the practice of growing thirsty plants indoors in the desert is of dubious value when the same plant can be grown with a fraction of the inputs in northern California and southern Oregon.
California’s legal system is a perfect example of how over-regulation fuels illicit market activity. Because of the structure of their regulatory framework and high taxes, the state is served by only 800 licensed dispensaries, whose prices are double and triple those found on the illicit market for similar products. This has led to the emergence of thousands of “pop-up” or unlicensed dispensaries, selling untested products tax-free in a thriving illicit market. The booming illicit market in California has also led to massive wholesale markets of hardware, branded packaging, and flavoring and cutting agents (all technically legal) to supply the illegal operators with everything they need to look legitimate. This is a major contributing factor to the wide-spread vaping related illness cases popping up all over the country, as many illicit market operators purchase their supplies in downtown Los Angeles.
The ban on interstate trade promises to continue to create new and novel problems as well. If New York, the 4th most populous state in the union, legalized adult-use (which seems likely in the near future), and interstate trade were still banned, it would require a massive investment, on the order of billions of dollars, to create enough indoor and greenhouse grow facilities to supply the demand created by its 19 million inhabitants. The recent legalization of hemp under the last Farm Bill has created a number of legal dilemmas as well, as some individual states that do not recognize any difference between hemp and cannabis flower have seized products and arrested individuals taking hemp legally grown in one state to a market where it is legal to sell.
Some suggest that these issues will be sorted in local markets, and in each state individually this approach might seem to make sense. When you add these problems together, though, a much more elegant, efficient, and obvious solution emerges: let states that have always exported cannabis send it to states that have always imported it. A set of different and seemingly unconnected problems become each other’s solutions.
Historically, people across the country have consumed cannabis, and the vast majority of it was grown in a few locations that are particularly well-suited to the plant. It is highly likely that a fully-matured nationwide legal market (one which must account for not only interstate, but also international competition) will ultimately be best served by the same general market dynamics. The only question is: how long will we allow the artificial market boundaries around each state to decimate local capital, curb access for patients and consumers, encourage investments that are attractive short-term but disastrous long-term, and prop up the illegal markets that pose a public health risk?
Interstate trade between states that allow some form of legal cannabis would provide much-needed relief on a number of fronts for cannabis businesses, and could be structured in such a way to support social equity efforts. With a little guidance on enforcement and thoughtful programs and agreements between states, there is a path to legal interstate commerce even before cannabis is removed from the Controlled Substances Act. The state of Oregon has already passed legislation allowing for the export and import of cannabis products provided that the Federal Government allows it. This could be either through legislation such as the proposed Blumenauer/Widen State Cannabis Commerce Act, or though DOJ enforcement guidance (whether from the Attorney General or the relevant local U.S. Attorney’s). There are multiple paths that can lead to the end of banned interstate trade, and it seems increasingly inevitable that we will see legal cannabis trade across state borders in the near future. For most operators in the cannabis industry, and for all patients and consumers, this will be a good thing, and can’t come soon enough.
Gabriel Cross is a Founder and CEO at Odyssey Distribution, LLC, a distributor for locally-owned craft cannabis producers and processors in Oregon. Gabe worked in the sustainable building industry for a decade before starting Odyssey and brings his experience with sustainability and systems thinking to his work in the cannabis industry. Odyssey manages logistics, sales and marketing for boutique producers so they can focus on creating great craft cannabis products for the Oregon market.
Member Blog: Changes in California Packaging Regulations are Coming – Are you Prepared?
Just when you thought you had a grasp on the tangled web of regulations governing California’s legal cannabis market, the packaging rules are changing again on January 1, 2020.
That’s right around the corner… so if you are a manufacturer, grower or producer, you need to pay attention or face consequences that could include product seizure, loss of revenues, and delays in getting compliant packaging on the shelves.
In a nutshell, current regulations in California allow that either the product must be in a child-resistant container, or it must be placed in a CR exit package.
New regulations, taking effect on January 1, mandate that all products must be in a certified child-resistant container. Moreover, edible products must be in a child-resistant re-sealable package.
While this will allow dispensaries to start offering interesting, branded shopping bags, it means that product packaging must be compliant and in place by the first of the year.
Accordingly, if your packaging currently does not meet the upcoming regulations, you are rapidly running out of time to replace it with new, compliant solutions.
Unfortunately, the fact is, it takes time to get new packaging designed, printed, shipped, fulfilled, and placed on shelves… Lots of time.
Let’s take a look at a typical timetable:
Creative
Getting your new packaging designed, revised, and approved. 2-4 weeks.
Sampling and Refinements
Once the design is complete, you’ll receive samples, which takes an average of 2 weeks.
Then, your team will analyze the packaging, and if necessary, the designers will make any refinements. 1 week.
Mass Production
Printing the packaging can take up to 8 weeks, depending on the supplier, season, and complexity of packaging.
Transit
A lot of printing these days is done overseas, where costs are lower. However, shipping times are much longer and can take 6-8 weeks to arrive. This includes loading and unloading, customs clearing, and ground transport.
Fulfillment
Getting your products into your new packaging takes time. Allow 1-2 weeks for this task, depending on the quantity and complexity.
Transit to Distributors and Stores
Finally, you’ll need to get your product to distributors and stores. Count on at least 1 week for each.
Summary:
If you add up the various steps – each critical to the process – you will see that your project can realistically take 20-26 weeks. That’s up to 6 months!
There are ways to trim this timetable, but inevitably, they start adding expense to the project. Accordingly, the best practice is to start the process at least 6 months before you need your packaging on the store shelves.
Granted, this schedule is for producing a premium packaging system. There are lower-cost solutions available, but these inevitably make your product look cheaper. This is especially important if you want to build an upscale brand and position your product as a luxury item.
The best advice is to contact a packaging professional as early in the process as possible and discuss your options, costs, and timetables.
Don’t start thinking about packaging a few weeks before a regulation change… get ahead of the game and start the process early to enjoy the most options, best results, and lowest costs.
CEO Kary Radestock
Kary Radestock, CEO, launched Hippo Premium Packaging in March 2016 offering an array of services to the cannabis market, including: Marketing Strategy, Brand Development, Social Media, Public Relations, Graphic and Web Design, and of course, Printing and Packaging. Radestock brings over 20 years of award-winning print and packaging expertise, and leads a team of the nation’s top brand builders, marketers and print production experts. Hippo works with businesses looking for a brand refresh or an entire brand development, and specializes in helping canna-business get their products to market in the most beautiful and affordable way possible. Radestock’s Creative Collective of talent and experts, allows her to offer world-class solutions to support the unique needs of the Cannabis Industry.
Member Blog: Advice for Surviving and Thriving in the New Era of Legal Cannabis From Those Who Have Climbed The Mountain (Part 1)
The challenges facing companies pioneering a new industry where each state deals with its own issues are numerous. The importance of strategic business planning and the ability to predict future problems are essential to survival.Colorado, Washington, and Oregon have each dealt with their unique issues and challenges but there are also common problems that every cannabis business experiences: burdensome regulation, unfair taxation, and banking prohibition to name a few. Building your company and brand is dependent on your ability to maneuver your company through the obstacles that will arise in your state market while also planning for a future of legal interstate commerce through a change in federal policy. To place your company in a position to be successful, you should understand the past to predict the future.
Quick Summary of Cannabis History
The history of cannabis is long and distorted, however a few basic points of what brought us to the current state of federal prohibition and individual state markets should be noted for context.
Cannabis use as medicine dates back to 2700 BC in China, and has been used throughout history. In 1850, it was added to the U.S. Pharmacopeia. Prior to state and then Federal prohibition, cannabis was an elixir/tincture used in many common household cough/cold syrups and other medications for stomach-aches, asthma, depression, and many others. In the 1930s, cannabis was regulated as a drug in all states, and in 1937, the passing of the Marihuana Tax Act regulated it federally. Then in 1970, the Controlled Substances Act determined cannabis to be a Schedule 1 drug meaning it has no medical benefit and a high risk for abuse. From 1970 to 1996 the manufacture, use, or possession of cannabis was illegal in all fifty states.
CALIFORNIA
In 1996, California became the first state to legalize the medical use of cannabis through Proposition 215. California was the first domino to fall and further background of the early days of California medical cannabis will be addressed in later blogs in this series focusing on California. Over the next twenty years, 37 states have joined California with medically legal cannabis, and nine states have passed and implemented legal “recreational” (now referred to as “adult use”) cannabis programs.
OREGON
Oregon was the second state to pass medical cannabis in 1998 and that was the start of this author’s journey through the cannabis industry. Prior to 1998, Oregon had been a bastion of black market cannabis cultivation due to its climate and wide open spaces especially in rural southern and eastern Oregon. After 1998, the state “protections” offered by medical cannabis state law allowed the cultivation industry to flourish. However, as opposed to California the state was more focused on growing weed and selling it around the country rather than setting up a distribution system to the medical patients of Oregon. This led to some of the early challenges of the medical cannabis program in Oregon. At this time, the Oregon population was relatively small compared to the state’s cannabis production. Oregon was on its way to being one of the largest cannabis producers in the country. But because cannabis was so easily accessible there was little effort put into a healthy distribution system to Oregon patients. Most patients either grew for themselves or had a designated “grower” and that is where I started in the industry.
OREGON: FORMATION OF RETAIL ESTABLISHMENTS
As a nurse who had self medicated with cannabis for ADHD, I began growing for patients because I wanted to provide others with access to the amazing health benefits of cannabis. This was the common way most patients accessed their cannabis. There were no dispensaries when the program started and patients who didn’t have a grower were relegated to barter trade types of acquisition. In 2005, the Oregon Legislature allowed growers to be reimbursed for the cost of production and in 2010, the first dispensaries began to pop up. However, it wasn’t until 2012 that legal retail entities were allowed. This lack of a retail access point for patients was one of the first impediments to the program and allowed states like Colorado and California to take the mantel on progress of a robust program of medical cannabis distribution.
COLORADO
In 2000, Colorado became the sixth state to allow medical cannabis with Amendment 20. Its medical program remained low key until 2010 when the Colorado Medical Marijuana Code was created, which provided for licensing of production and retail establishments. This change was a giant step to the progress of cannabis legalization.
Colorado followed the early model presented in California and began implementing licensed retail establishments for card carrying medical cannabis patients. Retails stores began to flourish and this laid the groundwork for the establishment of the Adult Use program. In 2012, Colorado became the first state to legalize what was originally referred to as recreational cannabis now called “Adult Use” cannabis, which allowed the sales of cannabis to all adults aged twenty-one and older and the boom began. Colorado’s medical program developed into a rapidly growing Adult Use system and with the new federal guidance of the Cole Memo in 2013 canna-businesses began growing rapidly.
COLORADO: SEED TO SALE TRACKING
The primary language of the Cole Memo highlights a “robust tracking system” of all products produced and sold. The Cole Memo did not provide protections for cannabis businesses but provided guidance that helped assure businesses of some safety from federal interference. With the advent and implementation of a tracking system we could now be assured of where products came from and be able to track them back to their origin.
COLORADO: LAB TESTING
Once tracking was in place, lab testing for the safety of the consumer came to the forefront of industry progress. This was one of the first problems Colorado realized it had with its blossoming industry. As opposed to Oregon which required all products sold through its immature dispensary system since 2012, Colorado had not required lab testing of all its products until 2016 after several large quarantines and destruction of unsafe contaminated products. Many Colorado producers struggled with new pesticide regulations and was an early sticking point to growth of the industry. Over the first years of Adult Use cannabis program, Colorado struggled with the infancy of a brand new industry and how to regulate it and consequently, businesses suffered.
Other early challenges that the first legal state dealt with were allowable dosages and changes to dosing, as well packaging changes and the look of products, specifically how or if the products were attractive or marketed to children. The obstacles of a new industry most directly affect the businesses and their bottom lines. These are important points to consider when strategizing your business model and planning for inevitable changes to regulations. The time spent preparing for a system that will change will go a long way to ensuring for success.
WASHINGTON
Now let’s talk about Washington.
Washington was the third state to approve medical cannabis but had problems with implementation due to legislative issues. As multiple pieces of legislation were offered, adopted, and repealed, the lack of clarity prevented the medical cannabis industry from launching. Washington passed its adult use cannabis program at the same time as Colorado in 2012. In Washington, the two major obstacles the industry faced were licensing issues and taxes. A previously existing strong medical program in Colorado allowed for a seamless transition to an adult use program, but that was not present in Washington and this added to difficulties with implementing an adult use program.
Because the industry was just getting off the ground, both states relied on their medical programs as a foundation to the adult use. However, Washington’s medical program was murky and disorganized which lead to complications, Washington also limited licenses and put unfair taxes on the industry. These two factors aided in keeping the black market as the primary driver of the industry, rather than pulling people or businesses into a controlled, tracked, and regulated system.
280E TAX CODE
This provides a nice segue to one of the challenges all cannabis business face: unfair taxes in the 280E tax code. Internal Revenue Code section 280E specifically denies a deduction or credit for any expense in a business consisting of trafficking in illegal drugs “prohibited by Federal law or the law of any State in which such trade or business is conducted” which translates to only “Cost of Goods Sold” as the only deductible expenses. This means administrative costs, executive salaries, marketing and advertising, banking fees, etc., are non-deductible expenses for any cannabis business and subjects them to much higher taxes as most normal business deductions are prohibited. This challenge is one all cannabis businesses deal with and must be factored into financial modeling.
BANKING
While we are on the the subject of taxes and non-allowable deductions, banking is the other major challenge all cannabis businesses face. Due to federal policy around an illegal substance, FDIC insured institutions force canna-businesses to operate in all cash for fear of prosecution under racketeering and money laundering laws. There are a handful of financial institutions, credit unions, or state banks that offer “Enhanced Monitoring Accounts” for cannabis companies. However, they are highly priced and rare. The average cannabis bank account is likely to run $1,000.00 a month, just to have access to banking services, not including additional fees. This $12,000 a year budget line item, while not only expensive, is not a tax write-off per 280E tax code.
One can quickly see from just these two major hurdles or challenges to the industry, normal operations can be difficult. These obstacles are not to be taken lightly; they can be addressed but it must be factored into operating procedures, financial planning/budgeting, and strategic vision.
NOW BACK TO STATE SPECIFIC ISSUES
As Washington and Colorado dealt with its issues, Oregon voted to approve “Adult Use” cannabis in 2014. Using Colorado and Washington as a guide, Oregon implemented their system with more deliberation and vision based on what had been experienced in the first two states. But as was seen with the unique challenges in the first two states, Oregon encountered an entirely different set of problems. Oregon currently faces a massive oversupply problem which has affected all facets of business across the industry. In normal business and supply and demand economics, if an area is oversupplied, business move their products to where the demand is higher or the supply is lower. However, cannabis remains a federally illegal product and therefore interstate commerce remains illegal.
Oregon’s unique problem originated from two main issues:
Oregon had already established itself as a cultivation mecca
The regulatory authority decided against a cap on licenses
This lack of license caps has allowed the number of licensees to explode and thereby allowed the oversupply issue to occur and continue to grow. As stated, this is not a problem exclusive to cultivator/producers. Because of a 75% drop in value, cannabis attorneys, electricians, HVAC, security companies and other ancillary businesses are not getting paid. The oversupplied market and decreased revenue has reverberated across the industry and driven otherwise thriving companies into bankruptcy.
As you can see, each state deals with its unique challenges when implementing its Adult Use cannabis program, while we all deal with some issues that affect us all. The key to thriving… or surviving is to prepare your company to deal with the current challenges shared by us all and predict the challenges that your business will face in your state while preparation is taken for a national and international market.
James Schwartz RN, BSN, LNC, is an experienced medical legal consultant and CEO of CascadeHigh Organics with 20 years experience cultivating legal cannabis. James is a self-described organic minimalist cultivating in the most sustainable manner. James believes in clean cannabis and its use as a wellness drug. His Oregon licensed cultivation, Cascade High, has been featured in Dope Magazine and on the cover of Oregon Leaf’s Sustainability issue (March ‘18). James was featured as the Inaugural Stoner Owner by OR Leaf in Dec 2018. He has articles published by Dope Magazine about Cannabusiness and the Pharmaceutical Industry (May 2017), as well as a medical cannabis article in the Jan. 2019 Healthcare issue of OR Leaf. James is currently on the NCIA Cannabis Cultivation Committee and has presented Cannabis topics to multiple audiences at conferences including Cannabis Science Conference, PDX Hempfest, Cannabiz Convention, CBD Expo and Webinar series, Cannabis Collaborative Conference(CCC), Cannabis Nurse Conference, NCIA and educational industry mixers. His business, legal, medical, and agricultural knowledge provides a unique perspective on the industry. James has lobbied for Cannabis on both the national and state level with Oregon Cannabis Association and is a fierce advocate for the plant and all who use it.
As 2018 came to an end, the FINAL proposed text of the permanent regulations for California cannabis were submitted to the Office of Administrative Law (OAL) by the three regulatory agencies – the California Department of Food and Agriculture (CDFA), California Department of Public Health (CDPH), and the Bureau of Cannabis Control (BCC). The cannabis regulations submitted to the OAL are currently undergoing a 30-day administrative review to ensure alignment with MAUCRSA and statutory requirements. These “final’ regulations shall become effective immediately upon approval/adoption which should be on/before January 16th 2019.
What “final” means in this evolutionary process of California cannabis regulations is debatable, as there are already several Assembly and Senate bills queued up to be put through the legislative tango and all three of the regulatory agencies have indicated that there will be further clean-ups and clarifications of the “permanent” regulations. Although there will assuredly be changes ahead, this is a highlight reel of where California Cannabis stands now.
For those that dug into the October redrafts, much of the substantial changes that occurred in that version carried over into the final proposed text. Here we will highlight the top eight changes impacting cannabis businesses in California.
The Final Statement of Reasons from the BCC, which also included responses to pertinent comments received during the previous 15- and 45-day comment periods, is where some greater clarity about the regulatory changes and intents can be found. It is by spelunking into these deeper caverns of reasoning where the sweet ore of further clarity can sometimes be extracted.
Here are 8 highlights for anyone interested in California cannabis.
1. Ownership and Financially Interested Parties
In October we saw the expansion of the definition of ownership and financially interested parties that clearly sought to capture the identification of any and all warm bodies that stand to direct, control, or financially benefit from commercial cannabis. While there were some changes in sections §5003 and §5004 between the previous and current version, the scope and intent remained the same. One particularly vague line §5003.b.6.D “Any individual who assumes responsibility for the license.” was removed from the BCC’s definition of owner, this very line turned up over the in the CDPH’s update in §40102.a.4.D.
The Ownership and Financially Interested Parties disclosures dovetail into the White Labeling issues (See #2) in that “Brand Owners” that may be licensing IP to contract manufacturers have been impacted by the prohibition on non-licensees conducting commercial cannabis business with licensees. In the response to comments in the FSOR was this gem of insight, “In response to commenter’s questions, if a licensee includes as one of their owners a brand-owner, the licensee can produce the branded products because in this case the licensee is not engaged in commercial cannabis activity on behalf of an unlicensed person. Because the owner of the brand is an owner of the licensee, there is no unlicensed person involved.” Of course, before everyone runs off and adds brand-owners as owners of their contract manufacturing business, let’s take a moment to reflect on the value and critical importance of a well-drafted contract.
2. §5032 (b) The So-Called “White Label Prohibition”
5032.b shall go down in infamy as one of the more talked-about sections of the BCC’s regulations. This simple sentence, “Licensees shall not conduct commercial cannabis activities on behalf of, at the request of, or pursuant to a contract with any person that is not licensed under the Act,” brought with it a level of confusion and white-hot panic regarding the inferred white label prohibition contained therein. October’s version had more explanatory examples for the types of “on behalf of, at the request of, or pursuant to” activities that the BCC was talking about, such as, “procuring or purchasing cannabis goods from a licensed cultivator or licensed manufacturer. Manufacturing cannabis goods according to the specifications of a non-licensee, Packaging and labeling cannabis goods under a non-licensee’s brand or according to the specifications of a non-licensee, Distributing cannabis goods for a non-licensee.” This language was removed in the final version submitted to the OAL and is one of the examples of where the FSOR is enlightening.
From the BCC’s FSOR: “Initially, the Bureau determined that it was necessary to assist licensees with determining what types of activities may or may not be allowed under the Act and its implementing regulations. The initial proposed change identified certain transactions that would generally be considered commercial cannabis activities under the Act. However, the Bureau has determined that inclusion of the clarifying example transactions is causing more confusion. Accordingly, the Bureau has decided not to move forward with the proposed changes which identify examples of specific commercial cannabis transactions.” The definition of “commercial cannabis activities,” therefore, is an important one, and we can refresh ourselves on that one (Business and Professions Code §26001.k) “‘Commercial cannabis activity’ includes the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of cannabis and cannabis products as provided for in this division.”
This has been a hot, hot topic, and there have been some great analysis articles of this provision that dig further into solutions and scenarios related to this section. Get thee to Google and find out more!
3. Option to label THC/CBD post-final testing by Distributor
This was a big win for the industry! A substantial percentage of testing failures for “label claims” are due to products, previously required to be labeled with THC/CBD content prior to final testing (the one test that counts!) not falling within the 10% allowable variance threshold. It’s common knowledge that the science of cannabinoid testing is still getting dialed in, and the labs have some serious challenges in hitting the same tiny target twice. Especially when they are dealing with the vast array of cannabis product matrices, and an industry that it still learning about important things such as homogenization. The good news is, the CDPH now allows products to be labeled for THC/CBD content after that all-important final test, which should eliminate well-upwards of 50% of the product failures in California and ensure a steadier supply chain.
4.Regulation of Technology Platforms
The cannabis industry has always been a place of innovation and loophole-finding. These regulations are an attempt to close some of those loopholes that seem to have created a situation where unlicensed tech platforms were enjoying the privileges of licensed commercial cannabis without undergoing the slings and arrows of local/state licensure and regulation. Seeing themselves outside of the regulatory purview, certain business claimed that agencies such as the BCC had no dominion over their activities. Well, they may have wanted to wait until the ink dried on the final regs before making such an assertion, as now it seems the BCC has expanded its reach to embrace all kinds of advertising, facilitating, and delivery platforms.
5. Delivery to a Physical Address
This was (potentially) a huge win for patient access, however, it remains to be seen how this truly shakes out. When the BCC added the line that “a delivery employee may deliver to any jurisdiction within the State of California” it caused some serious outrage from municipalities that have banned commercial cannabis activity, the League of Cities, law enforcement, and others that saw this as a huge overstepping of the local authority ensured by Prop 64 and MAUCRSA. The LOC even launched a “wandering weed” campaign, in response to which it seems that a subsection that includes “a restriction on delivering cannabis goods to a school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center” was added to the regulations, for clarity. Whether the OAL will approve as is, and how this interacts with local bans, tax requirements, and law enforcement, and lawsuits… stay tuned! While the BPC (§26090.e & 26080.b) explicitly prohibits a local jurisdiction from preventing delivery, and transportation, of cannabis goods on public roads, it does not prevent localities that have banned commercial cannabis in their area from adopting ludicrous tax rates for deliveries that would in effect ban via taxation delivery in their area.
6. Sale of Non-Cannabis Goods (aka No Hemp)
While the seeming victory of the Farm Bill has folks leaping with joy for the future of hemp, statements from the FDA and other agencies have certainly rained on the parade of many a CBD vendor. Add to that the collections of California cannabis regulations that in effect eliminate hemp-derived CBD from cannabis dispensaries and products.
“In addition to cannabis goods, a licensed retailer may sell only cannabis accessories and any licensee’s branded merchandise.” (BCC §5407)
This limitation for retail (and retail delivery) is further clarified in the BCC’s FSOR in their responses to comments:
“Cannabis retailers are licensed to sell cannabis goods. The definition of cannabis within the Act explicitly excludes industrial hemp products. Industrial hemp is regulated by the California Industrial Hemp Program under the California Industrial Hemp Farming Act.”
“A retail license from the Bureau authorizes the retailer to sell cannabis goods and cannabis accessories. A retail license from the Bureau does not authorize licensees to sell items that are unrelated to cannabis.”
Combined with the retail prohibition on non-cannabis products, this trifecta from the CDPH extends that prohibition to manufacturers:
“A manufacturer licensee shall only use cannabinoid concentrates and extracts that are manufactured or processed from cannabis obtained from a licensed cannabis cultivator.” (CDPH §40175.c)
“Except for cannabis, cannabis concentrate, or terpenes, no product ingredient or component shall be used in the manufacture of an edible cannabis product unless that ingredient or component is permitted by the United States Food and Drug Administration for use in food or food manufacturing, as specified in Everything Added to Food in the United States, or is Generally Recognized as Safe (GRAS) under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act.” (CDPH §40305.a)iii. “Except for cannabis, cannabis concentrate, or terpenes, topical cannabis products shall only contain ingredients permitted for cosmetic manufacturing in accordance with Title 21, Code of Federal Regulations, Part 700, subpart B (section 700.11 et seq.) (Rev. March 2016), which is hereby incorporated by reference.” (CDPH §40306.a)
For now, it seems, non-cannabis derived CBD is DOA in CA.
7. Child Resistant Packaging (CRP) Requirement
Heads continue to spin (and cannabis business’ cash to hemorrhage) in response to the changes in the packaging requirements. As of July 1, 2018, all cannabis products were to be in child-resistant packaging, and retailers had converted back to the statutory requirement that all exit packaging was to be “opaque,” allowing them to use reusable totes and paper bags to satisfy this requirement. In the October regs, we saw a pivot that allowed for a seeming “grace period” for the child-resistant requirement to return to being able to be satisfied by the retail via CR exit bag. Some confusion remained as to whether products that were already IN child-resistant packaging would have to be put INSIDE of child-resistant packaging for the next year. The addition of the statement from the CDPH, “Until the date specified [1/1/20] the child-resistant package requirement [§26120] may be met through the use of a child-resistant exit package at retail sale.” (CDPH §40417.d) suggests that the significant ecological impact of CR packaging within CR packaging MAY be avoided, however, most legal counsel will probably be advising retail clients to use the CR exit bag to avoid potential liabilities. Viva Kafka!
In the CDPH’s Statement of Reasons, they said “This is necessary to comply with the packaging requirements in Business and Professions Code section 26120 while providing licensees with time to comply with packaging requirements.” Compliant operators were left somewhat confused, as they had been required to comply with these packaging requirements since July!
8. OSHA Training for Everyone!
All three regulatory agencies added the following requirement for OSHA training:
“For an applicant with more than one employee, the applicant shall attest that the applicant employs, or will employ within one year of receiving a license, one supervisor and one employee who have successfully completed a Cal-OSHA 30-hour general industry outreach course offered by a training provider that is authorized by an OSHA Training Institute Education Center to provide the course.”
This will be an additional training requirement, on top of existing state and local training requirements for cannabis operators. And remember, all that training documentation must be kept, like all other records, for seven years!
As with everything in life, more will be revealed as we get deeper into 2019.
Juli Crockett is a member of the NCIA’s State Regulations Committee and is Director of Compliance at MMLG. Slides from Juli’s recent Workshop on this topic are available for download here. You can also watch the workshop video in its entirety on MMLG’s Facebook page.
Member Blog: News Flash – Quirky Cannabis Regulations Unchecked
California Bureau of Cannabis Control (BCC) Proposed Final Regulations:
There are some quirky cannabis regulations seldom discussed by industry professionals which have a hidden impact on your business operations. Most business owners are, as they should be, preoccupied with the more prevalent draconian-styled regulations, like license fees, taxation, and testing.
Obviously the state has public safety concerns with the legalization of marijuana, but has the state overreached in its mission to craft “robust regulations” for the industry. Upon review of 142 pages of proposed regulations, we opted to shine light on what we consider to be quirky cannabis provisions that have gone unnoticed by cannabis business owners. Some are laughable, others insulting; and as to the remainder, the state’s regulation of your cannabis business simply never ends.
The California Bureau of Cannabis Control BCC proposed final cannabis regulations are currently under review of California Office of Administrative Law AOL to complete the rulemaking process. After considering the following, one might ask, what exactly were the rule-makers thinking when they wrote these provisions?
California Quirky Cannabis Regulations
No. 1No Naked Employees
5806 Attire and Conduct
No licensee shall employ or use the services of any “host or other person to mingle with the patrons” … “in the sale or service of cannabis goods in or upon the licensed premises while such person is unclothed or in such attire, costume, or clothing as to expose to view any portion of the male or female breast below the top of the areola or of any portion of the pubic hair, anus, cleft of the buttocks, vulva, or genitals.” Nor shall the licensee encourage or permit any person “to touch, caress, or fondle the breasts, buttocks, anus, or genitals of any other person.”
– Cannabis Strip Club?
No. 2Beware Of Fake Buyers
5805 Minor Decoys
“Peace officers may use a person under 21 years of age to attempt to purchase cannabis goods, for the purposes of enforcing the Act, and to apprehend licensees, employees, or agents of licensees who sell cannabis goods to minors.”
– Entrapment?
No. 3Your Coffee Cup Is Regulated
5041.1 Branded Merchandise Approval
If a licensed distributor, retailer, or microbusiness “wishes to sell branded merchandise” – goods other than cannabis such as clothing, hats, pencils, pens, keychains, mugs, water bottles, beverage glasses, notepads, lanyards, cannabis accessories – “the licensee must receive written approval from the Bureau.”
To obtain a approval, the licensee must submit a written request and provide a photograph to the Bureau. Notably, there appears a discrepancy in the language of the regulation 5041.1 as to whether or not approval is required for all items listed in §5000(b) definition of “branded merchandise.”
Is this kindergarten?
No. 4$500 State Fee To Modify Your Reception Area
5014 Licensing Fees
An application and licensing fee of $500 is charged for “Physical Modification of Premises.”
Alterations or modifications to the premises include, but are not limited to: “the removal, creation, or relocation of a wall or barrier; or changing the activities conducted in or the use of an area identified in the last premises diagram provided to the Bureau.”
Hidden fee for commercial lease space improvements?
No. 5Cannabis Goods Intended For Disposal Must First Be Destroyed On The Premises Except Vape Cartridges Filled With Cannabis Oil
5054 Destruction of Cannabis Goods Prior To Disposal
Cannabis goods intended for disposal must remain on the licensed premises until destroyed into cannabis waste. The licensee must restrict access to the cannabis goods intended for disposal, store the disposal goods separate from the other goods, and first destroy the goods “on the licensed premises.” This includes separating the cannabis goods from any packaging, or container rendering it “unrecognizable and unusable.”
However, the licensee is not required to empty vape cartridges of cannabis oil prior to disposal, “provided that the vape cartridge itself is unrecognizable and unusable at the time of disposal.”
Statutory rhetoric?
No. 6 You Get One Chance, With One Lab, To Test Your Cannabis
5305.1 Re-sampling
Once a cannabis sample has been obtained for testing by the laboratory employee – which sampling must be “video recorded with the batch number stated verbally or in writing on the video at the beginning of the video and a visible time and date indication on the video recording footage” (§5305) – a licensed distributor may not have another licensed testing laboratory sample or re-sample the same batch for regulatory compliance testing without the Bureau’s blessings, e.g. you must first making a written request to, and obtain, the Bureau’s written approval to re-sample the same batch (§5705(g).)
Unnecessary barrier to quality control leading to heightened chance for product recall?
No. 7 Unfettered Discretion To Audit Your Business 24/7 Without Notice
5037 Record Retention
Licensees shall keep and maintain all business records related to commercial cannabis activity for at least 7 years to and including (a)(9) “all other documents prepared or executed by an owner or their employees or assignees in connection with the licensed commercial cannabis business.”
(d) All records are subject to review by the Bureau anytime . . . . Prior notice by the Bureau to review records is not necessary. The Bureau may review records outside of the licensee’s standard daily business hours.”
– Something Unconstitutional About This, Right?
No. 8 Ultimate Veto Power Over Renewal Of Your Retail License
5019 Excessive Concentration
Even if you satisfy all licensing regulatory requirements on both the local and state levels – the Bureau maintains the exclusive discretion to deny you a license and/or deny renewal of your license if the Bureau determines that (a) “an excessive concentration exists in the [geographical] area” where you operate.
Excessive concentration applies when either of the following conditions exist: “(1) the ratio of licensees to population within the census tract or census division in which the applicant premises is located exceeds the ratio of licensees to population in the county in which the applicant premises is located . . . . (2) The ratio of retail licenses or microbusiness licenses to the population within the census tract, census division, or jurisdiction exceeds that allowable by local ordinance . . . .”
Should the Bureau deny your license on this basis, the burden is on the you, the applicant licensee, to (f) “provide reliable evidence establishing, to the satisfaction of the Bureau, that a denial of a license would unduly limit the development of the legal market so as to perpetuate the illegal market for cannabis goods.”
Unreasonable evidentiary burden and extraordinary cost on applicant licensee to conduct an economic field study on an illegal market that is, in effect, a legal impossibility to achieve under any circumstances.
The list goes on. While the California BCC has clearly satisfied its commitment to promulgate “robust state regulations” for the industry, one wonders about the state’s definition of robust.
An experienced corporate litigator having worked in both the private and government sectors, Attorney Robyn Ranke has taken a modern business approach to the cannabis industry and in working with cannabis business startups. Throughout her legal career, Robyn has represented a diverse base of business clientele in a variety of industries involving both complex and novel legal matters. Her diverse experience as a business litigator provides a valuable legal platform from which she is uniquely postured to address the regulatory hurdles, costly pitfalls, unique business transactions, and business litigation risks that confront California cannabis business owners today and into the future as state regulations continue to evolve.
VIDEO: Member Spotlight With MedMen
In this month’s NCIA member spotlight, we visit with MedMen at their Santa Ana, CA, dispensary location. MedMen has grown to more than 18 storefront locations across California, Nevada, and New York, and currently employs more than 800 people. Co-founder and CEO Adam Bierman, along with co-founder Andrew Modlin, launched the company nearly a decade ago. Watch this video to learn more about MedMen.
“I don’t think we can expect to ever live out something like this again in our lifetime.”
– Adam Bierman, MedMen CEO and Co-founder
Video Spotlight: W Vapes
Learn more about NCIA member W Vapes in this month’s video spotlight. The California-based, award-winning vaporizer company focuses on pure, pesticide-free, CO2 extracted, lab-tested oil. Their products are now also available in Nevada.
VIDEO: Member Spotlight with Canndescent
In this month’s member spotlight, we visited with CEO Adrian Sedlin at his cultivation and processing facility in Desert Hot Springs, California. His company Canndescent has been acclaimed for its unique, modern packaging designs. Canndescent’s lifestyle-focused strain names, including Calm, Connect, and Cruise, answers this question for consumers: “How do you want to feel?”
VIDEO: Member Spotlight on Palm Springs Safe Access
In this member spotlight, we speak with Robert Van Roo, founder of Palm Springs Safe Access, a medical cannabis dispensary based in Palm Springs, California. PSSA has been a member of NCIA since 2014. Learn more about PSSA as they prepare to serve the adult-use market in California.
The End of Prohibition in California: An Interview with Berkeley Patients Group
At the conclusion of the first week of adult-use cannabis sales in California, we spoke to Sabrina Fendrick, Director of Government Affairs of Berkeley Patients Group, to get a picture of their recent launch into the adult-use cannabis market. Berkeley Patients Group has been serving patients in the Greater East Bay Area of Northern California since 1999 and is a founding member of NCIA.
Sabrina, what was the process like for Berkeley Patients Group to apply for an adult-use cannabis license in California?
What we got was actually a temporary license, so the process for that is not as onerous or complicated as the annual process. We submitted our local authorization, site plan, and landlord approval. We did this three times, one for adult-use sales, one for medical sales, and one for distribution.
We had to work very closely with the city of Berkeley to make sure we had all of our ducks in a row, which was a little bit complicated because Berkeley had a ban on adult-use commercial cannabis activity. We engaged with the mayor and city council to get a “carve out” for us since we are a Berkeley institution as the nation’s oldest medical cannabis dispensary. We were intensely involved in conversations with regulators like the Berkeley Cannabis Inspector Mark Sproat throughout the whole process. We had it a little easy actually since we’ve been around for many years, as we were established in 1999.
When did you learn you had been awarded the license and how did your team react?
We learned on December 15th that we had received all of our licenses at about 4pm on a Friday, and the whole team was elated. There was perhaps even a little anxiety in wanting to make sure we had everything ready to roll out on January 1 to start offering cannabis to adults in California.
The first few days have been generally pretty smooth. There are a few questions surrounding process and operations to figure out as we go, but the whole roll out process has been smooth. Not a whole lot has changed except we’re getting longer lines, and we’re making sure that our systems are in place to be fully compliant with state law and all of the staff training required to go with that.
What is your reaction to the recent news of AG Jeff Sessions announcing on January 4th to rescind the Cole Memo?
We fully intend to keep serving the Berkeley community and the surrounding area as a state-licensed locally-operated compliant business. Further action on behalf of the Attorney General and the Department of Justice remains to be seen, but we do have support from local politicians and regulators.
We’re confident that public opinion and federal protections will continue to support the will of the voters and states’ rights. The DOJ should be using law enforcement resources to go after real criminals committing real crimes, and not enforcing an outdated, archaic policy that has almost no support from the general public.
As is traditional on the first day of adult-use sales, did Berkeley Patients Group make its first sale of cannabis to anyone noteworthy?
Yes, longtime California cannabis activists Mikki Norris and Chris Conrad were sold the first cannabis purchase in our dispensary. They were both spokespeople for Proposition 64 all the way back to Proposition 215, so it was an honor to make the first sale to people who were actively involved in reforming these laws in California.
VIDEO: Palm Springs Regional Spotlight
NCIA visited the Palm Springs & Desert Hot Springs communities in September 2017 to meet and greet with current and future members. At this Member Drive networking event, cannabis industry professionals connect at the local level and reaffirm the importance of staying plugged in to a larger, national voice of thousands.
Video: Member Spotlight – A Therapeutic Alternative
Based in Sacramento, California, this month we meet Kimberly Cargile, director of the medical cannabis dispensary A Therapeutic Alternative, focused on holistic healing and patient support. Learn more about how her dispensary has integrated and become a part of the local community. They also offer additional holistic services such as yoga, massage therapy, sound therapy, meditation, and more.
Your 2016 Cannabis Ballot Initiative Rundown
Michelle Rutter, NCIA
by Michelle Rutter, NCIA’s Government Relations Coordinator
In November, five states will vote on legalizing adult-use cannabis for individuals over 21 – Arizona, California, Maine, Massachusetts, and Nevada – while an additional four states will vote on medicinal cannabis reform – Arkansas, Florida, Montana, and North Dakota. All nine initiatives differ slightly from one another and each has its own unique language.
Below are NCIA’s quick summaries of each of the initiatives. Read up, then visit the campaign sites for more information and how you can help make 2016 another success in the fight to end marijuana prohibition.
ADULT-USE
ARIZONA
The Campaign to Regulate Marijuana Like Alcohol (Proposition 205) legalizes the possession and consumption of marijuana by persons who are over 21 and levies a 15% tax on the sale of cannabis, which would then be allocated to education and healthcare in the state. This would create an estimated $113 million in new tax revenue.
– Allows local governments to regulate and limit cannabis businesses
– If passed, Arizona’s cannabis market is projected to surpass $1 billion within three years
The Adult-Use of Marijuana Act (AUMA) (Proposition 64) legalizes the possession and consumption of marijuana by persons who are over 21 and enacts a 15% sales tax, as well as a cultivation tax of $9.25 per ounce of flowers and $2.75 per ounce for leaves.
– Estimated $1.4 billion in revenues within the first year of a fully operational market
– Written to prevent licenses for corporate or large-scale cannabis businesses for five years, which is in order to deter “unreasonable restraints on competition by creation or maintenance of unlawful monopoly power”
California has the largest state cannabis market (medical or adult-use) in the country, estimated at $2.7 billion in 2016.
The Campaign to Regulate Marijuana Like Alcohol (Question 1) legalizes the possession and consumption of marijuana by persons who are over 21 and enacts a 10% sales tax in addition to the state’s 5.5% sales tax. The first $30 million in tax revenue from cannabis sales would be used for school construction, with any additional revenue allocated to the General Fund.
– Medical cannabis will not be subjected to the 10% sales tax
– Caps the number of cannabis stores and cultivators until 2019 and 2022, respectively
The Campaign to Regulate Marijuana Like Alcohol (Question 4) legalizes the possession and consumption of marijuana by persons who are over 21 and creates a Cannabis Control Commission of three members appointed by the state Treasurer, which would generally administer the law governing cannabis use and distribution, promulgate regulations, and be responsible for the licensing of commercial cannabis establishments. It also creates a Cannabis Advisory Board of 15 members appointed by the Governor.
– Enacts an excise tax of 3.75%, in addition to the state sales tax
– A city or town could impose a separate tax of up to 2%
The Campaign to Regulate Marijuana Like Alcohol (Question 2) legalizes the possession and consumption of marijuana by persons who are over 21 and designates the Nevada Department of Taxation to issue licenses to cannabis retailers, suppliers, testing facilities, and distributors.
– Gives local governments control over cannabis business locations, and forbids businesses to operate near schools, childcare facilities, houses of worship, and certain community facilities.
– Enacts a 15% excise tax on wholesale sales of cannabis, in addition to the existing sales tax which would apply to the retail sale of cannabis
– Revenue generated from these taxes would be used to support K-12 education
There are two competing initiatives on the 2016 ballot: the Arkansas Medical Cannabis Act (AMCA) and Arkansas Medical Marijuana Amendment of 2016 (AMMA), known as Issue 7 and Issue 6, respectively. The main differences lie in patient card fee limits, the organizations that would implement the program, the distribution of sales tax revenue, and whether certain patients could cultivate their own medicine. As of October 2016, Issue 7, the Arkansas Medical Cannabis Act (AMCA) was struck from the ballot. The initiative will still appear on the ballot, but the results will not be counted.
Arkansas Medical Cannabis Act (AMCA):
– Sets a cap on the fees required to get dispensary and cultivation licenses and the fees required for patient cards
– Assigns the Arkansas Department of Health to set rules for patient cards, medical conditions that qualify a patient for medical marijuana use, and operating rules for dispensaries and cultivators
– Requires that all sales tax revenue goes back into the medical marijuana program
– Permits qualified cardholders to purchase medical cannabis from non-profit compassion centers
– Allows patients and their caregivers to cultivate up to 10 cannabis plants at home provided they take steps to ensure it is secure
Arkansas Medical Marijuana Amendment (AMMA):
– Sets a cap on the fee required to acquire a dispensary or cultivation license, but no limit on the cost for patient card fees;
– Assigns the Arkansas Department of Health to set rules for patient cards and medical conditions that qualify a patient for medical marijuana use, and the Arkansas Alcoholic Beverage Control to establish operating rules for dispensaries and cultivators;
– Divides sales tax revenue, assigning 10% to the medical marijuana program, 10% to the Skills Development Fund, 30% to the state’s General Fund, and 50% to the state’s Vocational and Technical Training Special Revenue Fund
The Florida Right to Medical Marijuana Initiative (Amendment 2) allows medical use of cannabis for individuals with debilitating medical conditions as determined by a licensed Florida physician and allows caregivers to assist patients’ use of medical cannabis.
– Mandates that the Department of Health shall register and regulate centers that produce and distribute cannabis for medical purposes shall issue identification cards to patients and caregivers.
– Constitutional amendments on the ballot in Florida must garner at least 60% in order to pass. This is why the medical cannabis amendment on the ballot in 2014 failed, despite receiving 58% of the vote.
Montana is voting to amend their dysfunctional medical cannabis program that has basically been regulated out of existence. The initiative amends the Montana Marijuana Act of 2011 and renames it the “Montana Medical Marijuana Act” (I-182).
– Allows providers to hire employees to cultivate, dispense, and transport medical cannabis, and repeals the limit of three patients for each licensed provider.
– Repeals the requirement that physicians who provide certifications for 25 or more patients annually be referred to the Board of Medical Examiners.
– Removes the authority of law enforcement to conduct unannounced inspections of medical marijuana facilities and requires annual inspections by the State
The North Dakota Medical Marijuana Initiative will be Initiated Statutory Measure 5 on the ballot and is also known as the North Dakota Compassionate Care Act, which creates a state-regulated medical marijuana program for patients with specified debilitating conditions and written certifications from their doctors. Registered patients could obtain medical cannabis from a licensed non-profit compassion center, and if the patient lives 40+ miles away, they are permitted to cultivate a limited amount of cannabis for their medical use.
This year it’s more important than ever to make sure you’re registered to vote and get to the ballot box on November 8th. If you live in one of the nine states with a ballot initiative, cast your vote for ending prohibition or allowing patients access to medicine. Otherwise, don’t forget to cast your ballot for candidates at the local, state, and federal level who support cannabis reform to ensure that 2017 is the industry’s biggest year yet!
State Campaigns: Proposition 64 (CA) – More Than Industry, Justice
*Editor’s Note: As we enter the homestretch of the critical 2016 campaign season, NCIA has invited the state campaigns on marijuana policy to submit blog posts about the important work they’re doing. These campaigns need the support of the industry and the movement as they approach the finish line. If you haven’t already, please consider making donations of money or time to one or more of the state campaigns that are working to end the failed policies of marijuana prohibition.**
They say there are moments that define an industry. A point where the creators and innovators look around and realize that things will never be the same. For the cannabis industry, that moment is November 8, 2016. It is that moment when the industry stands poised to enter the sixth largest economy in the world, the state of California.
On November 8th, Californians will vote on Proposition 64. Like the states that have gone before it, this initiative would legalize the personal possession and cultivation of cannabis for adults 21 and over in California, and like other states, it establishes a regulatory system for the cultivation, manufacturing, testing and distribution of cannabis products throughout the state. But, aside from the basics, there are several aspects of Prop. 64 that the cannabis industry should be particularly aware of.
First, Prop. 64 allows for, but does not require vertical integration. This means that businesses have the opportunity to perform more than one cannabis-related function, but they are not required to. Limits on vertical integration increase as the size of the business increases. For example, the smallest cultivator under the microbusiness license (less than 10,000 square feet), can vertically integrate under one license, whereas the largest Tier V cultivator, which will not be licensed until 2023, cannot vertically integrate at all. There is a flexibility in California’s regulations designed to accommodate the large variety of business types already operating in the state.
Secondly, Prop. 64 does not deny a license to an individual simply due to a previous drug felony. The first state to put this in the initiative language, California has an industry that has, for the most part, been operating in a gray/illicit market for the past two decades, despite the fact that California has allowed medical cannabis since 1996. For many of these folks, an arrest is par for the course, and these experiences should not exclude a person from participating in the legal market. This is especially true for people of color, who run a greater risk of arrest and felony charges for marijuana than white people.
Additionally, it’s not all about the plant. Although a lot of attention is paid to the growing of marijuana, creation of marijuana edibles, and the sales of marijuana, most of the new industry will revolve around ancillary products and services that do not touch the plant. This is especially relevant in California, which has a legacy of innovation, not just in tech, but also in agriculture and tourism. The infrastructure needed to support the legal market, especially given the high levels of regulation, still needs to be constructed in California, and should Prop. 64 pass, there will be an additional 39 million people living under these new rules.
Finally, and perhaps most importantly, passing Prop. 64 will create opportunities for partnerships between the cannabis industry and the communities who have been most impacted by the war on drugs. Marijuana prohibition has caused immeasurable harm to vulnerable communities in California. And, while these communities exist in the current legal states as well, none of the legal states are as heterogeneous and have as much income and quality-of-life disparity as California. With a billion dollars a year of potential tax revenue on the table, and with 50 million dollars of that revenue promised to communities most impacted by the drug war, passing Prop. 64 is more a social justice issue than a regulatory one.
The cannabis industry has a lot to be excited about concerning legalization in California – the jobs and opportunities created and the innovation that can finally come out of the shadows. But it’s so much more than that. Legalization is about more than creating an industry; it is about civil rights, reducing mass incarceration, and advancing restorative justice. Passing Proposition 64 in California will be a powerful blow to the war on drugs, but we must know we must stay vigilant to the over-criminalization of people of color that will continue in America.
Amanda Reiman is Manager of Marijuana Law and Policy at the Drug Policy Alliance, where she works to develop DPA’s marijuana reform work as it relates to litigation, legislative and initiative drafting, campaign strategy, policy advocacy, media relations, fundraising, and public education in the local, state, federal, and international jurisdictions in which DPA is active. Reiman joined DPA in 2012 after working with Berkeley Patients Group, a renowned medical marijuana dispensary, as director of research and patient services. Reiman is currently a lecturer in the School of Social Welfare at the University of California, Berkeley, where she teaches Drug and Alcohol Policy, Substance Abuse Treatment, and Sexuality and Social Work.
State of the States: NCIA’s Affiliate Program
What is NCIA’s state affiliate program?
Over the last two years, members from particular states have approached us here at NCIA with the idea of forming state-focused affiliates. While NCIA’s mission is dedicated to federal policy change and the support of a national industry that is coordinated, sustainable, and responsible, we’ve begun a journey with a few of these dedicated members looking to do the same at the state level. Many of our members are already familiar with our state affiliates in California and Illinois.
NCIA dedicates its policy work to issues at the federal level, which informs the playing field for all 50 states. However, individual state cannabis markets have their own unique needs and challenges. An NCIA state affiliate is tasked with pursuing the same priorities as NCIA’s federal mission – advocacy, education, and community – but with a zoomed-in focus on state legislation and regulations, city ordinances, and local networking and business development. The combination of NCIA and a state affiliate gives members a powerfully unified voice in influencing legislation that is fair towards our industry.
How does the state affiliate program work?
Each state affiliate is an independent entity from NCIA, which elects its own board of directors and has its own decision-making processes. The affiliates are non-profit organizations, and dues are collected from members to be used for state advocacy work.
Membership dues for the state affiliate are split between the state affiliate and NCIA, and members of the state affiliate are automatically added to the rosters of NCIA’s national membership, although many members still choose to maintain separate memberships with both the state affiliate and NCIA.
Our state affiliates currently exist in the two most populous states with active medical marijuana programs in place: California and Illinois. We checked in with the leadership of each affiliate to hear more about their progress and activities at the state level.
CCIA’s Executive Director and co-founder is Nate Bradley, who works closely with their official lobbyist, Amy Jenkins, to influence fair legislation and policies for the ever-evolving cannabis industry. CCIA’s membership currently sits at 132 members and growing.
“In 2015, CCIA hosted numerous well-attended membership networking and educational events throughout the state,” says Bradley. “We also added new staff to our ranks. In the fall we hired a Membership Coordinator. This in turn greatly increased our ability to reach out and provide services to our current members and build new membership at the same time.”
CCIA focuses on the state regulatory structure for California’s cannabis industry, working to influence regulations for the medical marijuana industry in the state legislature. CCIA has endorsed the Adult Use of Marijuana Act (AUMA), a full legalization state ballot initiative being proposed for 2016.
“More than any other legalization measures competing for the 2016 state ballot, AUMA represents the collective input of California’s lawful medical cannabis industry,” said CCIA President Sean Luse, who is also COO of the nation’s longest continually operating medical cannabis dispensary, Berkeley Patients Group.
So what are CCIA’s plans for the upcoming year?
“CCIA has a lot of big plans for 2016,” says Bradley. “Currently we are planning on bringing a new deputy director, increasing the amount of events we hold, developing our local government outreach program, and increasing the amount of membership committees we have.”
“We will also be heavily involved in any legislation clean-up, tracking the regulatory rule-writing process, and last but not least, making sure we are actively involved in influencing any cannabis ballot initiatives that may go before voters in November.”
CCIA’s 2015 victories are listed here, along with details of the requests that were successfully negotiated and included in the Medical Marijuana Regulation and Safety Act.
Kayvan Khalatbari, co-founder of Denver Relief, serves on the board of directors for ILCIA and offers insight into the progress of its formation over the last year. “With all the work the National Cannabis Industry Association is doing to progress policy, advocacy, and education on the federal level, it’s important to have that same influence on the state level,” says Khalatbari.
“We’re working hard to create a model that is in line with NCIA’s mission and tone, but also considerate of the cultural and political nuances present in Illinois. We’ve assembled a great group to form our initial board of directors, which includes cultivation and dispensary operators, attorneys, lobbyists and ancillary service providers… in a sense, most stakeholders in this new and exciting industry. We intend on bringing aboard a doctor and a patient representative as well in this new year to ensure all voices relevant to the success of this industry have a seat at the table.”
Kayvan Khalatbari, co-founder of Denver Relief and board member of ILCIA
“With our current 25 members we have some room to grow, but have no doubt that will happen as we become more active and visible in 2016. Between assisting in the development and implementation of the NCIA local Cannabis Caucuses here in Chicago, assembling our own quarterly educational symposiums, networking events, and a lobby day in April, as well as collaborating with other groups to add qualifying conditions in the medical cannabis program, we’re poised to make a big push in having a positive and responsible influence as this industry gets off the ground here.”
“The bridge to our national partners at NCIA can only benefit that push forward and help ensure that cannabis businesses in Illinois are represented at all levels of government for years to come.”
Looking to get involved in one of our state affiliates? Visit their websites:
by Michelle Rutter, Government Relations Coordinator
This year is arguably the most crucial yet for the burgeoning cannabis industry, especially as it relates to policy. Although NCIA primarily advocates for cannabis reform at the federal level, what happens in each individual state is vital to the stances Members of Congress take on our issues.
Members of Congress care deeply about issues that directly affect their specific state or district. It’s imperative that more states enact cannabis reform legislation so that more Members have a vested interest in protecting their constituents. While cannabis reform is sweeping the nation at an almost unprecedented rate, it takes time for politicians in Washington, D.C., to catch up with public opinion back home. If all of the federal lawmakers representing just the 15 states mentioned below were to vote positively on pro-cannabis legislation, it would add up to more than 180 Representatives and nearly 30 Senators.
Take a look below and see what’s coming up next in 2016. Remember that by becoming a member of NCIA, you are adding your voice to the coordinated and unified campaign at the federal level to allow cannabis businesses access to financial services, fix tax section 280E, and ultimately end federal cannabis prohibition.
The United States of Cannabis
Arizona activists remain ahead of schedule and have nearly gathered the 150,000 signatures needed to put the state’s Campaign to Regulate Marijuana Like Alcohol initiative on the November 2016 ballot. (The campaign ultimately aims to collect 230,000 in order to insure against signature drop-off.) It’s estimated that Arizona’s adult-use market could be worth up to $480 million.
With a multi-billion-dollar cannabis industry in California alone, passing an adult-use legalization initiative in the state is vital to ending federal prohibition. The most prominent full retail initiative gathering signatures for the November 2016 election is the Adult Use of Marijuana Act, which is backed by billionaire Sean Parker and the Marijuana Policy Project.
Legalize Maine and the Marijuana Policy Project have joined forces to legalize adult-use cannabis in 2016. Legalize Maine has already collected 80,000 signatures. Only 61,000 signatures are necessary to place the measure on a statewide ballot, but the organization’s goal is 95,000, to insure against drop-off. The deadline to submit signatures is February 1st.
Last August, a pair of cannabis advocacy groups separately filed paperwork to get adult-use legalization on the 2016 ballot in Massachusetts. The state recently confirmed that a measure to legalize recreational cannabis next year has enough valid signatures to force the legislature to consider the measure. If the legislature decides to pass, then the campaign will have to collect another 10,792 signatures to formally make the November ballot.
There’s no question that adult-use legalization will be on the ballot this year in Nevada. Initiative Petition 1, which would tax and regulate marijuana similarly to alcohol, has been certified for the 2016 ballot. Backers had previously collected nearly 200,000 signatures to either force legislators to enact their initiative or put it on the ballot. When state lawmakers abstained from voting on the issue, the measure was automatically forwarded to this year’s ballot for a popular vote.
In Florida, the group United for Care received clearance from the state Supreme Court for a 2016 ballot measure that would legalize medical marijuana. The group nearly succeeded in legalizing medical marijuana in 2014, garnering 58% of the vote but falling barely short of the state’s constitutionally mandated 60% margin needed to pass,
The nation’s capital continues to debate cannabis. In December’s federal budget bill, the taxation and regulation of marijuana in Washington, D.C., was blocked by Congress again, though possessing and gifting cannabis remains legal in the city.
This month, Hawaii will begin accepting applications for medical cannabis businesses. The bill signed into law last summer opens the door for up to 16 dispensaries on the islands.
It was recently announced that Illinois saw approximately $1.7 million in medical cannabis sales during November and December of 2015. There are already petitions being circulated in the state that would expand the law’s qualifying conditions.
Maryland will award cannabis cultivation, processing, and dispensary licenses this summer. Industry advocates were pleased with the amount of interest the state’s program garnered: more than 1,000 applications were submitted.
Officials in Michigan have approved language for three different adult-use cannabis legalization initiatives for the 2016 ballot. In order to have the best chance of passing, it’s important for these groups to coalesce behind one initiative.
At the end of 2015, New Hampshire began issuing medical marijuana cards to qualifying patients. It’s expected that the state will open medical dispensaries in 2016.
After a long and arduous journey, New York’s medical cannabis program became operational this month. The cannabis industry expects the program and the law’s qualifying conditions to expand this year.
In the first week of 2016, Oregon began accepting adult-use cannabis business license applications. The state has no limit on how many licenses they will decide to award.
Vermont may become the first state to legalize adult-use cannabis through the legislative process in 2016. The proposed bill would allow for up to 86 storefronts and five different business license types.
Bonus: Election 2016 – Yes, We Canna
As we all know, a new president will be elected this November, and with that a new administration will assume power next January. It is very crucial that Congress pass more pro-cannabis legislation before then.
It’s probable that Attorney General Loretta Lynch will be replaced in 2016 or early 2017. This is important because it is the Department of Justice that enforces and prosecutes federal marijuana laws.
Another possibility for 2016 is that the acting head of the Drug Enforcement Administration, Chuck Rosenberg, could be replaced as well. Rosenberg is notorious for his gaffe last year when he called marijuana “probably” less dangerous than heroin.
On New Year’s Eve, officials from the Substance Abuse and Mental Health Services Administration posted a notice on the Federal Register that calls for a report “presenting the state of the science on substance use, addiction and health” to be released in 2016. Industry advocates are hopeful that this report could be the first sign of re- or de-scheduling cannabis from the Controlled Substances Act.
During 2016, NCIA will continue working with D.C.-based public affairs firms Heather Podesta + Partners, and Jochum Shore & Trossevin PC to magnify our efforts to address the industry’s top federal priorities: access to basic banking services and fair federal taxation.
In addition to NCIA’s lobbying and advocacy efforts, NCIA exists to connect and educate our members on all facets of the cannabis industry. Our industry supports tens of thousands of jobs, tens of millions in tax revenue, and billions in economic activity in the United States.Our core mission is to ensure that our members are treated like businesses in any other American industry. Join NCIA today to get involved and be a part of the cannabis revolution!
by Michelle Rutter, Government Relations Coordinator
As we look forward to 2016, there’s much on the horizon for the cannabis industry. NCIA remains dedicated in its effort to pass banking and tax legislation through Congress that would provide immediate relief to cannabis-related businesses all over the country.
In addition to the federal advocacy that NCIA engages in every day, there will be at least five states seeking to legalize and regulate adult-use cannabis via the ballot initiative process: Arizona, California, Maine, Massachusetts, and Nevada. It’s also likely that Florida will have another ballot initiative relating to medical cannabis, and it’s possible that other states will move forward with cannabis reform through ballot initiatives or legislative processes. What happens over the next twelve months will be crucial in shaping the future of the legitimate and responsible cannabis industry.
While 2015 was a milestone year for cannabis reform, that same momentum will be necessary in order to continue moving the conversation forward with Congress in Washington, D.C. The Rohrabacher-Farr medical cannabis amendment earned more that 60 Republicans votes. For the first time ever, there are multiple pro-cannabis bills that have been introduced in the U.S. Senate. Continued progress is vital in garnering more national support for cannabis reform, so make sure your interests are heard through national advocacy, education, and community with NCIA.
The timeline below lays out some of the highlights from a busy year in cannabis industry advocacy. We look forward to more exciting milestones with your help in 2016!
*Click on the “Full Screen” button (with the four arrows) at the bottom of the image to expand its size.
Guest Post: Favorable IRS Ruling – State Excise Tax May Escape 280E Treatment
by Luigi Zamarra, CPA
On July 31, 2015, the IRS released ILM 201531016, concluding that the old Washington State cannabis excise tax may be properly treated as a reduction of gross revenues received. This is a very favorable ruling for our industry as it means that this tax can escape the harsh non-deductibility treatment of IRC Section 280E.
Although this ruling is applicable directly only to old Washington law, it may have far-reaching consequences for cannabis businesses operating in other jurisdictions that also impose special taxes on cannabis business activities.
As originally enacted, the Washington excise tax is imposed upon all sales of cannabis, at either the producer level, the processor level, or the retail level. As written, the tax is imposed upon each sale. (This law has now been amended so that the tax is imposed only at the retail level.)
The IRS has concluded that businesses may treat this tax as a reduction of Gross Revenues. This treatment is similar to “Returns & Allowances” in that it is a “Revenue Contra Account.” As such, it is not an expense, either above-the-line (Cost of Goods Sold) or below-the-line. Since it may be treated as a reduction of Gross Revenues rather than as an expense, it should escape treatment as non-deductible under IRC Section 280E.
Colorado also imposes a variety of special taxes upon cannabis sales. In California, local cities and counties impose special taxes on cannabis sales too. Although it is not yet clear, it seems there may be opportunities for businesses in these jurisdictions to take advantage of this ruling. This would involve these businesses changing their accounting treatment for these taxes: away from an expense or Cost of Goods Sold treatment and toward a Revenue Contra Account treatment.
Businesses are advised to consult with their CPA for a more in-depth analysis of the application of this ruling to their particular situation.
Luigi Zamarra, CPA
Luigi Zamarra, CPA, has been a member of NCIA since 2013. Luigi CPA is an accounting firm located in Oakland, CA, that helps all types of businesses and individuals with tax planning, tax compliance, and tax dispute services. Luigi specializes in the medical marijuana industry. He helps these businesses comply with IRC Section 280E so as to balance tax cost against audit examination risk.
*Disclaimer: NCIA does not provide legal or financial services or advice. Any views or opinions presented in this guest blog post are solely those of the author and do not necessarily represent those of the organization. You must not rely on the legal information on our website as an alternative to legal or financial advice from your lawyer or other professional services provider.
Mack Bush
By Jodi Green, Miller Nash LLP; Shay Gilmore, The Law Office of Shay Aaron Gilmore
by Madeline Grant, NCIA’s Government Relations Manager
Excerpt from 
Gabriel Cross is a Founder and CEO at 
James Schwartz RN, BSN, LNC, is an experienced medical legal consultant and CEO of 
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