Proposition 64: The Control, Regulate and Tax Adult Use of Marijuana Act (“AUMA”): 11/02/2016

While cannabis remains classified as an illegal substance under federal law, as of mid-2016, 25 states and D.C. have enacted laws recognizing an exemption for the medical use of cannabis by qualified patients.

Four states (Alaska, Oregon, Colorado and Washington) and D.C. have legalized cannabis for 
adult recreational use and several others have proposals addressing legalization on their November 2016 ballots. If all such proposals were to pass in 2016, the list of states where recreational use is legal would more than double.

California’s initiative, Proposition 64 (the AUMA), has been heavily anticipated and polling 
favorably since its qualification for the ballot. According to recent polling the AUMA is expected to pass, with wide-reaching implications for California’s cannabis industry, including the medical cannabis industry.

If the AUMA Passes . . .

The AUMA would primarily legalize recreational use by adults 21 and older; regulate and 
tax the production, manufacture and sale of cannabis; and amend the state’s criminal penalties, reducing many of the most common felonies associated with cannabis to misdemeanors. Some of the measure’s highlights are discussed below.

Adults would be able to legally possess up to one ounce (28.5 grams) of cannabis and up to 
eight grams of concentrate (e.g. hasish, wax), and grow up to six plants for personal use.

Six categories of state licenses would become available in January 2018: cultivation, 
manufacturing, testing, retail, distribution and microbusiness. Though largely patterned on 1 ca-pot- survey-20160913- snap-story.html the Medical Cannabis Regulation and Safety Act of 2015 (“MCRSA”), which also goes into effect in 2018, the AUMA licenses will be distinct from the MCRSA’s.

The AUMA would impose a 15% excise tax on both medical and recreational sales of 
cannabis, although medical marijuana patients would be exempt from the sales and use taxes currently levied (7.5 – 10%) by the Board of Equalization. Moreover, it imposes a cultivation tax on all commercial medical and recreational cannabis, calculated by dry- weight ounces, as follows: $9.25/oz. of flower; $2.75/oz. of leaf. Local control also remains intact in the AUMA, as municipalities are free to impose additional taxes as they see fit.

The microbusiness license, unique to the AUMA, would allow small operators (with a 
cultivation area under 10,000 sq. ft., to cultivate, distribute, manufacture (limited) and sell at retail their cannabis crop, all under the one license.

As compared to the MCRSA, the AUMA would have fewer restrictions on a licensee’s ability 
to hold multiple licenses. Where the MCRSA has very specific controls on combination of particular licenses one may hold, the AUMA only disallows large cultivators from holding distribution, testing and microbusiness licenses.

Also, both medical and recreational cannabis may be sold from a single location, as the 
AUMA specifically addresses and assents to this scenario.

The AUMA would also impose buffer zones (geographical restrictions) in which licensees are prohibited from operating. All licensees must operate more than 600 ft. from schools, day care centers and youth centers that are in existence when the license is granted. An exemption to the buffer zone requirement would be available only if a municipality specifically authorizes it.

Stay Tuned: November 8, 2016

With the largest cannabis industry in the world, California is expected to become a hotbed 
of activity as businesses and investors will be aggressively jockeying for their share of the lucrative, multi-billion- dollar industry.

Understanding the laws as they develop and learning how to navigate the regulatory maze 
will be critical to those seeking to get and stay ahead of the competition in a highly competitive industry.

Election day is just around the corner — stay tuned to the M.J. Legal Blog where you can 
find updates on all relevant industry developments.

Federal Cannabis Policy Regarding Native American Sovereign Tribal Lands: 07/10/2015

Native Indian nations indigenous to this country, despite the numerous challenges facing their communities,enjoy a unique position within the American political system.  A federally recognized tribe is a Native Americanor Alaska Native tribal entity that is recognized as having a government-to-government relationship with the United State. From 1778 to 1871, this relationship was largely defined by treaty process, which recognized and established a unique set of rights benefits and conditions for possession of nationhood status under federal law.  The Supreme Court affirmed this position by stating, “that tribes poses a nationhood status and retain inherent powers of self-government.”  The legal obligation binding Indian nations to the United States are defined by the Federal Indian Trust, in which the United States “has charged itself with moral obligations of the highest responsibility and trust” towards the Indian Nations of America.  According to the Department of Indian Affairs, “the federal Indian trust responsibility is also a legally enforceable fiduciary obligation on the part of the United States to protect tribal treaty rights, lands, assets, and resources, as well as a duty to carry out the mandates of federal law with respect to American Indian and Alaska Native tribes and villages. Tribal sovereignty is a means by which to prevent further encroachment by other sovereigns, i.e. the states and the federal government.  Tribal sovereignty also ensures that decisions about the tribes with regard to their property and citizens are made with their participation and consent.  This relationship has important implications when it comes to the developing marijuana markets.


The Justice Department issued a memo last Octoberthat it would no longer prosecute federal laws regulating the growing or selling of marijuana on reservations, even when state law bans the drug. Timothy Purdon, the U.S. attorney for North Dakota and the chairman of the attorney general’s subcommittee on Native American issues affirmed this stance stating, “that federal prosecutors will not enforce federal pot laws as long as reservations meet the same guidelines as states that have opted for legalization.” He continued by stating that the federal government would also support any ban by tribes within states that have legalized recreational use i.e. the Federal Government is ceding decision authority to the tribal governments.  Tribes will be required to follow the same guidelines as states for the non-diversion of product but will be under entirely different burdens when it comes to taxation which raises further questions about relative positioning within the market vs. state contained entities.


Since the announcement by the Justice Departmentlate last year, over 100 tribes have expressed interest in perusing marijuana facilities on tribal land. In South Dakota where cannabis is still illegal at all levels, the Flandreau Santee Sioux Tribe took the trail blazing step to legalize recreational use for all adults over 21 and medical use for those under the age of 21.  Meanwhile in California,The Torres Martinez Desert Cahuilla Indians recently entered into a partnership with Red Crow, a Native-owned cannabis company that designs, builds, manages and finances marijuana growing facilities for medical purposes.Cultivation operations have already begun construction across the country on various tribal lands including a new facility in Santa Rosa, California called Santa Rosa Farms.These multi-million dollar investments into tribal economies are expected to support tribal financial independence while also creating hundreds of jobs.  The Federal government’s position regarding medical cannabis on tribal land has effectively given some Native Americantribes in California a temporal advantage to realize a position in the developing and rapidly expanding legal cannabis markets.  What remains to be seen is whether this initial advantage can be maintained once open markets within the states begin to compete.

MJ Legal visits the 2015 Northern California Cannabis Cup: 06/28/2015

It is probably the same feeling a first time visitor feels when walking into any foreign bazaar. The sounds, smells and activities are all blurred in a cacophony of fast paced marketing and high velocity sales.  All around you commerce is commencing in a raucous fashion more akin to a festival then an organized marketplace. The 2015 Northern California Cannabis Cup commenced last weekend in San Francisco to a crowd of 20,000+ attendees. The show was bustling with vendors wearing promotional materials advertising their waresbeautifully crafted booths and endless varieties of products all on display to the excited attendees. After the initial surprise of walking into the medicating area of the Cannabis Cup the surroundings begin to come into focus. As far as the eye could see, booths were set up in unique configurations celebrating the awe-inspiring cannabis plant in all of its many forms.   

Attendees, vendors and guest alike quickly acclimate to the vernacular of this fascinating event. Free dabs, medicated edibles, lab-tested flower were available in any and all quantities, competing for a coveted Cannabis Cup Trophy. Years of industry infighting and bureaucratic posturing have resulted in this grand event. Patients no longer have to medicate in private, fearful of law enforcement and instead openly celebrate their medical cannabis use. One man proclaimed” I haven’t changed my activities in 35 years but I can now finally explain to my Grandchildren what it is I do and how it doesn’t make me a criminal.” It was an uplifting experience seeing the cannabis leaf being displayed in a proud manner only further demonstrating how far the evolution of this plant has progressed in societies’ eyes.  

We as a firm have experienced trade shows and conventions in many varied capacities, but what made this experience differ from all of those is the camaraderie shared by all the people in attendance. You wouldn’t know that in the business world of medical cannabis these people are competing viciously for market share and brand recognition. At the cup, however, everyone is a patient and thus everyone is a friend. Unlike most of our experiences at trade shows and conventions, this year’s cup truly felt like a celebration as to how far the industry has come rather than a networking event to market the services of our firm.  Instead competitors, musical artists and advocates alike spent their time celebrating a cause greater than themselves. The theme seems set on changing the world we live in by changing the way that people view the cannabis plant and it’s byproducts.  It was refreshing to see this multigenerational gathering of patients flock to an otherwise mediocre venue and create a fascinating and uplifting event. It is safe to say, there was something special in the air other then the abundance of cannabis smoke.  Medical Marijuana has finally crashed into mainstream culture in a way that is allowing it to come out of the shadows and share its development with society as a whole. 

Thank you San Francisco and thank you High Times, for an event worth remembering and returning to for years to come!

I want to grow, what are my limits? An Analysis of Cultivation limits in California: 06/08/15

Every day at our firm we consult with clients interested in cultivating medical cannabis while complying with all applicable laws that govern cannabis cultivation.  More often than not what they specifically wish to ascertain is the limits by which they are allowed to cultivate marijuana in the State of California.  The simple answer is given to us by the 2004 State Bill 420, which provides us with the 6 mature plants limit per valid recommendation or 12 immature.  This is the only real limit that has ever been set on a statewide level.  To this response most of our clients bring up the growers exemption or growers recommendation.  This exemption is a reflection of the holding of a personal possession case that reached the California Supreme Court, People v. Kelly.  In Kelly the court decided that the Compassionate Use Act authorized a doctor to recommend the therapeutically necessary amount of cannabis to meet a patient's medical needs, was in conflict with SB420, which placed strict possession limits on patients participating in the Medical Marijuana Program.   The court therefore found that the personal possession limits we not allowable and instead a doctor’s recommendation would be used to determine personal need.  The finding in this case led to what is today known as the grower exempted recommendation which unofficially authorizes a patient to grow as many as 99 plants for personal use.

There is just one big problem with this interpretation of the law.  Nowhere in this holding does it ever mention collectives, dispensaries or cooperatives.  Thus, the next question that is consistently asked is, “if me and my friends each have an exempted recommendation, can we each grow 99 plants in a facility together?  The answer is, “only if the marijuana produced is for personal consumption to meet an exaggerated medical need.”  This response is not what people interested in lawfully cultivating medicinal cannabis are are looking for.  Most are looking for a practical way to provide safe access, for in-need patients, to a strong clean product at a fair price.  There unfortunately is no overlap to these interpretations of the law.  If you want to participate in collective or cooperative activities; you as a provider are under much different requirements.  For example when growing for one's personal possession, there are no sales and thus no profit.  For medical marijuana produced for a collective there almost always is at least one sale involved meaning that the entire operation must operate as a non-profit and must adhere to the requirements of non-profit collectives which again is 6 mature plants per valid recommendation.  In addition many regions and local municipalities have site restrictions that limit the number, location and manner in which plants may be grown.

This discussion is sometimes confusing and disconcerting for a first-time client who is new to this industry.  However, our team at MJ Legal brings a holistic approach to working with our clients which allows us to assist them with navigating even the most complicated of bureaucratic issues that plague this industry in California.  If you are interested in learning more about medical cannabis cultivation in the State of California, please contact our office to set up an appointment.

The Current State of California’s Medical Cannabis Laws: 05/11/15

In 1996, California voters approved an initiative that exempted certain patients and their primary caregivers from criminal liability under state law for the possession and cultivation of marijuana. Known as the Compassionate Use Act, this initiative created what today is known as California Medical Marijuana Program. In 2003, the Legislature enacted additional legislation relating to medical marijuana. Known as Senate Bill 420, this legislative act authorized medical collectives for cooperative procurement of medical marijuana. Since then, there have been no comprehensive statewide regulations adopted in order to regulate this multibillion-dollar industry.  There have been several legislative attempts at a solution but alas twenty years after the original initiative still no clear regulation exists.  This lack of regulations has allowed California to become what Lieutenant Governor Gavin Newsome calls the “The Worst of All Worlds” of the Cannabis industry.  Fortunately, 2015 has been a significant year for the cannabis industry on a national level.  The final CRomnibus federal spending bill included historic language prohibiting the U.S. Justice Department from spending any money to undermine state medical marijuana laws.  Additionally for the first time, the federal government is considering changes to the Controlled Substances Act that would see marijuana treated like other medicinal products.  This would be of greater significance to California if the state had clear guidelines regulating the cannabis industry.

Two California Assembly bills as well as a Senate Bill are competing to create a framework for how medical marijuana can be produced and sold within the State.  Medical Marijuana Public Safety and Environmental Protection Act (SB643) authored by Humboldt County State Senator Mike McGuire focuses on the environmental impacts of cannabis cultivation. The Medical Cannabis Regulation and Enforcement Act (AB-34) authored by Rob Bonta and Reginald Jones-Sawyer would instead create a “strong regulatory regime” that would facilitate increased industry safety and higher quality product.  The bill primarily focuses on State level enforcement but allows for local ordinances as well.  Finally, the Medical Marijuana Act (“AB-266”) authored by Ken Cooley, places regulatory power in the hands of local authorities with some State oversight. Under AB-266 a single state agency would issue licenses while local authorities draft the actual ordinances regulating production and sales.  All three bills have overcome the same legislative hurdles in their respective houses and are now awaiting the appropriations committees. AB-266 has the support of Police Chiefs and the League of California Cities while AB-34 has the support of the California Cannabis Industry Association and the Emerald Grower Association (EGA).  

While it remains to be seen which sponsors line up behind SB643, change is coming for the California Medical Marijuana industry.  It appears that producers and collectives would prefer a more holistic approach that sees statewide reform and regulation that allows for more open and public operation.  This would mean empowering agencies like the State Bureau of Alcohol Beverage Control, department of public health and department of food and agriculture. In order for this standardized regulation to be achieved, many local bans, moratoriums and zoning restrictions need to be relaxed and by effect local authority will be reduced.  Police Chiefs and Cities seem to be backing AB-266 because it gives them the greatest control over policy while only ceding licensing authority to a single state agency.  While the authors of AB-34 call their bill “ the single most thoughtful, innovative bill on the subject California has ever seen,” authors of AB-266 say it does little to respect the right of local municipalities to make choices for their cities.  At the same time Ken Cooley has invited proponents from all sides to offer modifications to his bill stating, “You’ll be hard pressed to find a member who is more open to finding a reasonable center then me.”  It is clear that members of the legislature observe the State’s calls for reform but it is still unclear as to weather the needs of the industry and the greater public are being appropriately balanced to allow for harmonious coexistence.

A Look Ahead at 2015 - The Legal Cannabis Industry: 01/28/15

2014 will be looked back on as a turning point for the anti-prohibition movement. Our country witnessed the first recreational cannabis market open in Colorado, and then in Washington. For the first time, the Federal government released guidelines setting up a framework for marijuana businesses to gain access to banking and financial services. Couple that with 2 new states (Alaska and Oregon) joining the recreational adult-use market and the pro-cannabis provisions of the 2015 Federal Budget, and 2014 proved to be nothing short of historic. But after such an incredible and progressive year for the anti-prohibition movement, what do we have in store for 2015?  Here are my predictions…

Increased involvement from mainstream investors – Until now, finding capital to launch a cannabis business was limited to friends and family and a high risk private equity firms. As the business climate for legal climate becomes less volatile, mainstream investors and institutions are slowly entering the market.  This will provide the necessary capital as well as the legitimacy of being associated with mainstream financial institutions. More importantly this will increase the already-mounting pressure to provide this industry with access to banking.

Decrease in Federal raids and arrests- After the passage of the now infamous “Cromnibus” spending bill was passed in January, the federal government has effectively defunded enforcement of state medical marijuana programs by the Department of Justice and the Drug Enforcement Agency.  Between now and the expiration of that provision in September, I expect to see a substantial drop in Federal involvement with state-compliant medical marijuana businesses.

Critical mass of Lawmaker support on a Federal level will be reached:

Supporting legal cannabis is no longer the political liability it’s been in the past. Many politicians on both sides of the aisle have quietly supported marijuana legalization for decades, but were unwilling to get behind the movement in any substantive way. In 2015, I predict we will see more progressive democrats and libertarian-leaning republicans throw their support towards sensible cannabis policy. This is already being demonstrated at the state and local level, and I believe the anti-prohibition movement will find a louder voice within the halls of the United States Congress.

Preemption Marijuana Bills by State Legislatures:

As of now, every state that has moved forward with medical or recreational marijuana laws has done so by taking the vote to the people and letting them decide through a ballot initiative. This has led to sweeping legislation that lawmakers have little to no input in its creation. As a result, an increasing number of state lawmakers are working to create and pass their own cannabis legislation before citizens put the issue on the ballot. I predict that 2015 may be the year a state legislature passes a law to legalize and regulate medical cannabis in their state.

Those are my predictions based on my work in this industry. Regardless of whatever developments come this year, I'll be right here on the MJ Legal Blog to analyze and discuss.

A Historic Week in the World of Legal Cannabis: 12/23/14

Last week, the United States congress passed a spending bill to fund the Federal government until next September. This legislation had many provisions that were placed in the bill in the final stages of negotiations, several of which were highly controversial and caused a vocal uproar from politicians on both sides of the aisle. But, despite the flawed and compromised nature of this spending bill, there were a few provisions that will make any supporter of cannabis legalization very happy.

Congressman Dana Rohrbacher (R-CA), and Sam Farr(D-CA) introduced an amendment to the Federal Spending bill that would block the Department of Justice from using the funds in the spending bill to prosecute patients or businesses operating under state medical marijuana programs. The passage of this amendment is a milestone achievement for the national decriminalization, because for the first time, lawmakers at the federal level took steps to limit the federal government's ability to prosecute state-legal marijuana businesses. Although the language of this amendment leaves room for interpretation, the overall legislative intent could not be more clear. With this amendment it will be much more difficult for the Department of Justice and the DEA to continue its persecution and harassment of lawful cannabusinesses, particularly in the state of California, where raids and seizures of property continue to this day.

Despite the historic nature of this amendment and the positive implications it has for everyone involved in the legal cannabis industry, this law is not the silver bullet we’ve been waiting for. The provisions in this amendment are attached to a spending bill, which means that it will expire next September and will need to be renewed. Furthermore, the language is not conclusive, and some agencies may continue to interfere with state cannabis businesses claiming that their actions are not “undermining” the state’s cannabis program. Regardless of the laws shortcomings, it is still a major step forward in the ongoing decriminalization and reform movement sweeping this country, and the first major step by federal lawmakers to roll back Federal prohibition on medical marijuana programs.