Cannabis Biz – National

Different Perspective – We have regularly stated the chaos in California’s cannabis industry was predictable and inevitable. Our usual focus is on a specific issue. When we focus on a problem we invariably suggest solutions.

This article takes a different tack. In this article, we will review some recent history and look at the causes of the chaos from a distance. We are hopeful a broad perspective will provide a framework for solving specific problems. Far too frequently seeking and finding a solution to a specific problem without examining the particular problem in a broad perspective merely substitutes a new problem for the first one.

California’s cannabis industry grew and evolved fairly steadily from the mid-‘60s to the mid-‘90s. The industry grew and prospered as an outlaw industry. California’s cannabis landscape dramatically changed in 1996 with the passage of Proposition 215. [See  Keeping Proposition 215’s Promise]  ] Proposition 215 amended California’s Constitution to legalize personal possession and use of medical marijuana. For the next fifteen years, medical marijuana was legal in California with vague parameters. Of course, possession and use of marijuana remain criminal under federal law.

California’s marijuana industry continued to grow and prosper as a quasi-legal, largely covert, criminal industry. California passed SB 420 in 2003 in order to provide some guidance regarding Proposition 215. [See California Cannabis Cultivation – Qualification as Farming ] Then-Attorney General Jerry Brown issued a memorandum addressing the use of cooperatives and collectives in 2008 for the cultivation and distribution of medical marijuana. [See Background – California Cannabis Regulation] Some local jurisdictions encouraged medical marijuana activity. Most communities tolerated or actively discouraged such activity.

Political pressure for comprehensive regulation of cannabis, formerly known in California as marijuana, grew in fits and starts in the 20 years following the passage of Proposition 215. California’s cannabis industry also grew steadily. Beginning six or eight years ago, the rate of growth began to increase as did the pressure for state-wide regulation of cannabis in California.

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In 2015 the Legislature passed the Medical Cannabis Regulation and Safety Act (“MCRSA”). MCRSA was “Too little, too late.” A second amendment to California’s Constitution, Proposition 64, passed in 2016 [See Implementing Proposition 64] Proposition 64 legalized adult-use of cannabis in California. Proposition 64, unfortunately, did not stop with the legalization of adult-use of cannabis. Proposition 64 also attempted to create the foundation for a comprehensive regulatory structure for California’s cannabis industry.

Proposition 64 has one outstanding feature in addition to its legalization and decriminalization of adult-use of cannabis. Proposition 64 preserved the rights granted California citizens under Proposition 215. The preservation of the rights granted to California citizens under Proposition 215 in the long-term will prove to be one of the most significant features of Proposition 64. In this regard, it is of critical importance to never forget that both Proposition 215 and Proposition 64 were amendments to the California Constitution.

Proposition 64 was ill-conceived and poorly drafted. Proposition 64 passed through the support of a combination of otherwise irreconcilable political forces. Proposition 64 left ultimate control of adult-use cannabis in the hands of local jurisdictions – a feature that is not present in Proposition 215. Proposition 64 allows for legislative modifications that cannot be made with respect to Proposition 215. The drafters of Proposition 64 appear to have given little thought to the impact of the implementation of Proposition 64 on the rights of California citizens under Proposition 215.

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One example of the differences between Proposition 215 and Proposition 64 will quickly become apparent as the litigation over local control of the delivery of cannabis wends its way through California courts. Even if the delivery of adult-use cannabis can be banned by local jurisdictions based on the authority preserved for local jurisdictions in Proposition 64, the delivery of medical cannabis into a local jurisdiction from another local jurisdiction cannot be prohibited. The issues relating to the delivery of cannabis is one of several reasons we have mentioned on multiple occasions that medical cannabis will provide a solution to a some of the issues that have arisen in California’s regulation of its cannabis industry.

A confluence of a number of political forces produced the passage of Proposition 64. Perhaps the most significant force was the promise of a new source of tax revenue. Who could oppose the regulation of a problem that would pay for the cost of regulation and provide additional tax revenue for other purposes? The promise of tax revenue that would be willingly paid by others was no doubt the tipping point for Proposition 64. Proposition 64 imposed two new taxes on cannabis – Cannabis Cultivation Tax (“CCT”) and Cannabis Excise Tax (“CET”). The collection of these taxes has, however, proved to be a challenge.

There were a number of other significant political forces that resulted in the passage of Proposition 64. The social injustice produced by decades of irrational drug policies was one. The hundreds of thousands of Californians that have a family member who believes in the medical benefits of cannabis was another force. Another driving force was the conflict between libertarian attitudes and the increasing intrusion of the government into daily life. The always-present tension between the “Haves” and Have-Nots” and the opportunity for financial success that many believed existed in a legalized cannabis industry were also forces in the passage of Proposition 64.

The Legislature acted to reconcile Proposition 64 and Proposition 215. The Legislature cobbled together Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) to establish a single integrated regulatory framework for medical and adult-use cannabis. In view of the conflicting pressures, MAUCRSA is not the disaster it could have been. MAUCRSA established a workable regulatory structure for California’s medical and adult-use cannabis industry. The devil, of course, is in the details. It is in the implementation of the details that California has fallen on its face.

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It is not MAUCRSA, but the administrative agencies tasked with the implementation of MAUCRSA that have brought chaos to California’s cannabis industry. The Bureau of Cannabis Control (“BCC”) is responsible. BCC is the lead agency, although CalCannabis, which is a Division of the California Department of Food and Agriculture, and the California Department of Tax and Fee Administration, as agencies, have caused far more direct damage. [See [California Crushing Cannabis IndustryCalifornia Cannabis Regulation BlundersCalCannabis Licensing Debacle?,  A TROJAN HORSE!,  Reasonable Rules?, and Colossal Cannabis Fiasco] BCC failed to provide the leadership required to more effectively transition California into regulation.

All is not lost. California’s cannabis industry will continue to evolve toward a more stable state-wide situation in which cannabis is a readily available, easily accessible regulated commodity. How long it will take and how it will proceed can be influenced by positive leadership from BCC. We would give BCC a “D” at this time. Foresight, judgment and forceful leadership over the next six months could turn BCC’s grade into a “B” by 2020.

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