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 http://www.latimes.com/politics/la-pol- 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.
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 a 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.
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.
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.
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.
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.