September 30, 2020

Newsom Decides on 2020 Cannabis Bills
Regardless of how tumultuous a year is, statutory deadlines remain the same, and thus we have reached the end of another legislative session. Governor Newsom delayed publishing decisions on most bills this year due to the wildfires throughout the state but has finally issued approvals or vetoes to all pending legislation. Most 2020 cannabis legislation did not make it to Newsom’s desk, in part due to the devastating impacts of COVID-19 on the state budget. Below is a summary of some that made it to the last round. AB 545 – Bureau of Cannabis Control (BCC): Assemblymember Low pushed to establish additional oversight of the BCC by requiring it to undergo a sunset review. These reviews, which are required by all boards and bureaus under the Department of Consumer Affairs except for BCC, seek to increase protection of the public by subjecting regulatory bodies to a regular review. If they do not pass, then the Legislature could allow the law that authorizes the power for these bodies to “sunset,” which would dissolve the board or bureau. In his veto message, Newsom pointed to the administrative restructuring he seeks to complete next year with the three cannabis regulatory bodies, stating AB 545 was premature. His message is a strong sign that stakeholders must be prepared to engage in the restructuring process early next year. It will be important to institute a sunset review on the new authority to ensure that its powers are kept in check. AB 1470 – Cannabis Testing: A common sense bill intended to save businesses significant resources, AB 1470 clarified that the “final form” of a cannabis product means the unpackaged product as it will be consumed. Currently labs and manufacturers are spending unnecessary resources packaging or unpackaging products for mandatory testing. With the illicit market still thriving, it is important to continue removing regulatory burdens to help the legal market survive. However, even with no opposition or “no” votes by legislators, Governor Newsom rejected the bill claiming that it could result in consumer harm and may disproportionately impact small operators. Stakeholders will need to show evidence of safety and benefits for all operators if they push the issue again next year. Using data and protocols from other states may be helpful in developing a new strategy. AB 1525 – Financial Institutions: Given the political climate, little progress has been made on banking for cannabis businesses. Newsom worked to change that with the signing of AB 1525,  one of several bills over the past few years attempting to find creative solutions to a problem that has plagued the industry for decades. The provisions clarify that California law does not prohibit financial institutions from serving cannabis businesses. They also allow track-and-trace data to be shared with financial institutions with the intent of decreasing compliance costs to meet federal requirements. Newsom directed the regulatory authorities to protect businesses’ confidential and proprietary information and specify how a licensee may withdraw their authorization. The new law is effective January 1, however, it will take time for the regulatory authorities to update their regulations and systems to allow data to be shared. With no specific timeline in the bill, it will be on stakeholders and the Legislature to keep the pressure on and make sure the relevant changes are done in a timely manner. SB 67 – Appellations of Origin: Newsom awarded farmers a big win by signing SB 67, tightening the requirements for creating an appellation of origin. The new law, effective January 1, 2021, allows one to be established only if the cannabis is planted in the ground, in open air, with no artificial light during the flowering stage until harvest. While some progress was made, many hoped for greater change this year. Taxes, retail expansion, social equity programs, and the sunset date for provisional licenses are a handful of the policy areas left untouched. To help keep some issues top of mind for regulators and legislators, some stakeholders are using the Cannabis Advisory Committee meetings as a tool to shed light on challenges faced by the industry and encouraging committee members to make favorable recommendations to the state. Legislators and their staff often look to advisory committee reports for bill ideas so tune in if you are able. The committee will meet again sometime in October. With the state budget guaranteed to be tight again next year, only the highest priority or lowest cost bills will be viable so it will be important for stakeholders to plan accordingly and engage early with state leaders. Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.