August 16, 2017

A hefty chunk of the cannabis industry’s 2017 has been all about regulations—the local and state rules that detail how to implement California’s new cannabis laws. With a January 1, 2018 deadline for issuing licenses, officials have been working as quickly as governmentally possible to finish the regulations before the end of the year.

At the state level, there has already been one full set of regulations proposed to the public; however, they were related to the original Medical Cannabis Regulation and Safety Act (MCRSA) and are now outdated. The three state licensing authorities—the Department of Consumer Affairs, the Department of Food and Agriculture, and the Department of Public Health—must now revise and draft new regulations that relate to updated cannabis laws under the Medical and Adult Use Cannabis regulation and Safety Act (MAUCRSA). Time is the limiting factor, pushing regulators and Governor’s administration to use emergency, rather than regular, rulemaking processes for the final round of regulations in 2017 to make sure the state is ready to go next year.

The goal of the rulemaking process is to ensure the public participates in the establishment of regulations. The main difference between the regular and emergency processes is the amount of time provided to the public to submit comments on the proposed regulations. While we are given a leisurely 45 days for the regular process, that period is cut to a tight five-day window for the emergency one. They are only used in response to situations that call for immediate action to avoid serious harm to the public peace, health, safety, or general welfare. Emergency regulations are like a governmental band-aid; they allow businesses to begin or continue to operate and simultaneously buy the state some time as it works out the normal regulatory procedures.

The shortened timelines may leave some wondering if California will be stuck with rules that don’t work or are not business-friendly. With hundreds of pages of regulations expected, it will be challenging to sift through all of them quickly. However, it is critical that the public have an adequate opportunity to comment on the rules that they will have to abide by. Fortunately, the “band-aid” emergency cannabis regulations that the state will be implementing this year will only be valid for 180 days. The regulators are required by law to put any regulations that they would like to make permanent through the regular rulemaking process before the 180-day clock is over. This means that the public will have one last bite at the apple—with a 45-day review period—before any regulations are set in stone.

What will be in these emergency regulations? Everything the state considers are the bare minimum requirements for the cannabis industry to operate and for the state to enforce the law. We should see things like the final proposed application and licensing fees from all three licensing authorities, a definition of “processing,” and requirements for the microbusiness license. We will also see a lot of familiar proposals; the state has implied that many of the regulations that were proposed for the MCRSA will be useful in providing a framework for MAUCRSA. Any rules that will not apply for some time, such as details about the renewal process and Type 5 cultivation licenses on unlimited canopy will likely come later. But since the state has received thousands of comments on the first round of MCRSA regulations, we will hopefully see some changes that make the updated rules more favorable for the industry. Many stakeholders submitted comments on important issues such as the maximum allowable potency per package of cannabis product, the requirement to provide information for community property interests, colocation of businesses, and the prohibition on refrigerated products, to name a few. The rulemaking process is intended to help educate state regulators on industry best practices and assist them in striking a balance between business-friendly rules and strong enforcement. In order to minimize the black market and encourage entrepreneurs to enter the regulated market, the state should be open to feedback and consider any reasonable alternatives posed by the public.

With the emergency regulations estimated to be released in the early fall, the next few weeks are guaranteed to be game-changing for the California cannabis industry. The best way to prepare yourself for the emergency regulations is to familiarize yourself with SB 94, the current cannabis laws, and think about the priorities for your business. What do you have to be able to do? What can you live without? What is going to be best for your employees and customers? The proposed emergency regulations will be released before we know it. Even though the public will still have an opportunity to comment through the regular rulemaking process one last time after this, it is important to make sure your voice is heard early to ensure the state has understands the essential parts to your business operations. Stay engaged and active. 2018 is almost here!

Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.