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As California Legislative Session Ends, Lawmakers Advance Some Marijuana Bills But Stall On CBD

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As California’s legislative session drew to a close this week, lawmakers approved measures to reform marijuana taxes, expand industry access to banking and launch a state-regulated appellation program to help identify where cannabis is grown. A hotly contested proposal to regulate hemp and CBD, however, failed to make the cut.

The handful of successful bills, some of which weren’t decided until the legislature’s final hours Monday night, now head to Gov. Gavin Newsom’s (D) desk. With his signature, they’ll shape the next phase of one of the nation’s most dynamic marijuana markets.

Most of the changes are more modest than industry advocates had hoped for when the year began, said Amy Jenkins, a lobbyist and senior policy director for the California Cannabis Industry Association (CCIA).

“We at CCIA were looking at this as a potentially transformative year,” she told Marijuana Moment in an interview on Tuesday, with many businesses hoping the state would consolidate a number of regulatory departments. “All of that really came to a halt in March, with the COVID pandemic and need to essentially shelter in place and mostly shut down business as usual.”

“We went from, as an industry, talking about these really exciting, transformative reform concepts to really post-pandemic preservation,” she added.

Perhaps the biggest victory for the industry in 2020, Jenkins said, had nothing to do with the legislature at all: As the pandemic set in, regulators deemed the marijuana industry essential, allowing businesses to continue operating. “Really progressive areas, like San Francisco, were poised to shut down,” she said. “I think a lot of people discount the significance of that.”

Some of the newly passed bills that will make their way to Newsom’s desk, such as those involving banking and appellations, result from years-long efforts by advocates. Others, such as tax and testing changes, represent more mechanical adjustments to the market.

Here’s a quick rundown of the measures passed by lawmakers:

Appellations

Senate Bill 67 would help establish a long-awaited appellation program to allow producers to designate the physical origin of their marijuana, much like how wine regions are regulated. It would also prevent companies from misrepresenting where cannabis is grown, for example by misleadingly using the popular names of Humboldt or Mendocino counties in advertising and labeling. Under the bill, marijuana must be grown—either indoors or outdoors—in a designated city or county in order to qualify to use that name.

“People were really excited about this bill, because I think it solved two issues,” Jenkins said. “From the craft, sun-grown cultivator’s perspective, this kind of preserved the integrity of terroir, which is something that is really really meaningful to them, factoring in the sun and the soil and the topography.” At the same time, she said, it allows growers in regions less conducive to outdoor cultivation—Jenkins pointed to Los Angeles and the Coachella Valley as examples—to still represent and capitalize on their respective regions.

“I was so pleased to see this bill pass last night and that it’s heading to the governor’s desk,” Jenkins said Tuesday. “All indications are that he’ll sign it.”

Tax Relief

California marijuana businesses have been complaining about taxes, which in parts of the state are among the highest in the nation, since the plant first became legal. While reforms in Assembly Bill 1872 are more restrained than many in the industry had pushed for, Jenkins at CCIA still describes them as a win. Among other changes, the bill essentially freezes potential increases on tax rates on marijuana, which lawmakers have said is an acknowledgement of the pandemic’s financial effects—and the fact that cannabis businesses don’t qualify for federal relief.

“We thought it was important to give these companies tax certainty over this next year because they are not getting much of the relief that other small businesses are getting through the federal government,” Assemblymember Phil Ting (D), chair of the chamber’s Budget Committee, said in an interview with Cannabis Wire.

Banking

Another thorny industry issue has been access to financial services. Many big banks, being federally regulated, have avoided working with marijuana operators due to cumbersome regulations about doing business with clients engaged in what remains federally illegal activity. While California lawmakers can’t change the federal landscape, Assembly Bill 1525 removes state penalties for working with marijuana clients.

“This bill would provide that an entity, as defined, that receives deposits, extends credit, conducts fund transfers, transports cash or financial instruments, or provides other financial services, including public accounting, as provided, does not commit a crime under any California law solely by virtue of the fact that the person receiving the benefit of any of those services engages in commercial cannabis activity as a licensee,” a Legislative Counsel Digest description of the bill says.

Advocates are hopeful the bill’s adoption by California lawmakers will send a message to Congress about the need for federal reform. Beyond that symbolic support, Jenkins at CCIA said the bill’s passage is meant to reassure financial institutions that work or are considering doing work with the marijuana industry.

“We talked to the banking community, and they said they wanted this and needed this,” Jenkins said. “If that bill can serve to encourage more banks to bank the industry, then that was something we wanted to take very seriously.”

On the federal level, talks about marijuana banking are ongoing. A vote on federal descheduling expected this month could open the door to financial services for the entire legal industry if the bill is enacted into law. The House passed a standalone cannabis banking measure last year and included the reform in its latest version of a federal COVID relief bill, but so far the Senate has not adopted the change.

Testing

Lawmakers sent along a few product-testing tweaks for the governor’s approval, including a measure that would allow manufacturers to submit unpackaged product—rather than a product in its final retail packaging—to testing labs. Industry advocates said the change will remove a needless expense for producers, making state-mandated testing more affordable. Another bill would require more precise measurement of THC content in edibles, while a third would allow state-licensed cannabis testing labs to provide testing services to local law enforcement or prosecuting agencies. That law enforcement work wouldn’t be considered “commercial cannabis activity” overseen by the Bureau of Cannabis Control.

Hemp CBD Regs Fall Short

One widely anticipated piece of legislation that didn’t clear the finish line this legislative session had to do with hemp-derived CBD. For the second consecutive year, an effort to pass a bill that would regulate hemp CBD in food, beverages, cosmetics and dietary supplements was scuttled at the last minute as stakeholders failed to reach an agreement before the legislative deadline. A proposal still being hammered out in the session’s final weeks would have finally regulated CBD in food and beverages, which have been sold for years amid legal uncertainty.

A pervasive sticking point, however, was the draft versions’ proposed ban on CBD products intended for smoking and vaping. Jenkins said she and CCIA repeatedly attempted to strike smoking and vaping products from the suggested ban, though she acknowledged the matter is a “controversial issue” from both a political and industry standpoint.

Another industry group, the U.S. Hemp Roundtable, was frank in its disappointment about the failure to cross the finish line. “This weekend, our political system let us down,” the organization said in an email newsletter. “Due to intra-party fights that had nothing to do with our legislation, the state Senate leadership refused to allow a vote on our legislative language.”

While legislation action will have to wait for future sessions, Jenkins at CCIA said, work on the proposal is expected to continue with urgency. “The conversation is not going away,” she said, “and I think there’s going to be additional stakeholder discussions that will inevitably occur throughout the fall.”

All in all, Jenkins said, California’s 2020 legislative session was one of “modest wins” for the industry, which isn’t too bad given COVID’s abrupt halt to regularly scheduled programming. “We went from about 36 bills down to about ten. That was the lowest number of bills I’ve seen since I’ve become a cannabis lobbyist” in 2015, she said.

Still, Jenkins said, the results are heartening in terms of signaling the normalization of an industry long regarded as politically taboo. Of the bills that passed, she noted, many sailed through on unanimous or near-unanimous votes.

“I think that’s a great testament to everything the industry has been doing to educate the legislature,” she said. “They passed overwhelmingly with bipartisan support, and I think that is something that we shouldn’t overlook. It’s a testament to how far we’ve come.”

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Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Ben Adlin is a Seattle-based writer and editor. He has covered cannabis as a journalist since 2011, most recently as a senior news editor for Leafly.

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Missouri Launches Medical Marijuana Sales At State’s First Dispensaries

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Less than two years after Missouri voters approved a ballot measure to legalize medical marijuana, dispensaries made the state’s first cannabis sales to patients on Saturday.

N’Bliss Cannabis opened the doors of two separate St. Louis County locations, in Ellisville and Manchester.

“Missouri patients have always been our north star as we work to implement the state’s medical marijuana program,” Dr. Randall Williams, director of the Missouri Department of Health and Senior Services, said in a press release. “We greatly appreciate how hard everyone has worked so that patients can begin accessing a safe and well-regulated program.”

Officials have touted the speed with which they have gotten the voter-approved cannabis program off the ground, saying it is “one of the fastest implementations of a medical marijuana program in the United States.”

Via Missouri Department of Health and Senior Services.

“A tremendous amount of work has occurred by the licensed facilities and our team to get us to this point, and we continue to hear from more facilities that they are ready or almost ready for their commencement inspection,” Lyndall Fraker, director of the Section for Medical Marijuana Regulation, said in a press release. “We look forward to seeing these facilities open their doors to serve patients and caregivers.”

The impending launch of sales on Saturday was first announced by the Missouri Medical Cannabis Trade Association on Friday and reported by The Springfield News-Leader.

The state, which has so far licensed 192 dispensaries and expects most of them to open their doors by the end of the year, posted an interactive map that tracks the status of approved medical marijuana businesses.

For months, regulators have been caught up in lawsuits and appeals challenging their licensing decisions, with revenues that would otherwise go to supporting veteran services instead being allocated to covering legal costs.

Missouri isn’t the only state to see medical cannabis sales launch this weekend. Virginia’s first medical marijuana dispensary also held its grand opening on Saturday.

Meanwhile, recreational sales of marijuana rolled out in Maine last week—four years after voters there approved a legalization ballot measure.

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Illinois Continues Record-Breaking Marijuana Sales Streak, New State Data For September Shows

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For the fifth month in a row, Illinois is again reporting record-breaking marijuana sales, the state Department of Financial and Professional Regulation announced on Monday.

Despite the coronavirus pandemic, Illinois has seen escalating cannabis sales month-over-month. In September, consumers purchased more than 1.4 million marijuana products worth a total of nearly $67 million. Almost $18 million of those sales came from out-of-state visitors.

In August, the total sales reached about $64 million—the previous monthly record. The new adult-use sales figures don’t include data about purchases made through the state’s medical cannabis program.

This latest data seems to support the notion that the state’s marijuana market is “recession-proof” and “pandemic-proof,” as a top regulator said in August.

Via IDFPR.

State officials have emphasized that while the strong sales trend is positive economic news, they’re primarily interested in using tax revenue to reinvest in communities most impacted by the drug war. Illinois brought in $52 million in cannabis tax revenue in the first six months since retail sales started in January, the state announced in July, 25 percent of which will go toward a social equity program.

“We were not doing this to make as much money as fast as we possibly could,” Toi Hutchinson, senior cannabis advisor to Gov. J.B Pritzker (D), said. “We were actually doing this for people,” with a focus on supporting communities most impacted by the drug war.

In May, the state also announced that it was making available $31.5 million in restorative justice grants funded by marijuana tax revenue.

That said, ensuring an equitable market as promised hasn’t been easy. Regulators have recently faced lawsuits after dozens of would-be social equity licensees were denied an opportunity to participate in a licensing lottery over alleged problems with their applications. The state said it would approve 75, but only 21 ultimately qualified—and critics complain that the resources it takes to submit an acceptable application creates barriers for the exact people the special licenses are supposed to help.

The governor announced last month that new procedures would be implemented allowing rejected applicants to submit corrected forms. But on Monday, three investors who are finalists from the initial round filed a lawsuit against the state, alleging that the administration’s decision to permit resubmissions was politically motivated and illegal.

For now, the out-of-state sales data seems to support Pritzker’s prediction during his State of the State address in January that cannabis tourism would bolster the state’s coffers.

Prior to implementation, the pardoned more than 11,000 people with prior marijuana convictions.

Over in Oregon, officials have been witnessing a similar sales trend amid the global health crisis. Data released in August reveals that the state saw about $106 million in medical and recreational cannabis sales, marking the third month in a row that sales exceeded $100 million.

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California Governor Approves Changes To Marijuana Banking And Labeling Laws

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California Gov. Gavin Newsom (D) signed a handful of marijuana bills into law on Tuesday, making a series of small adjustments to the nation’s largest legal cannabis system. More sweeping proposals such as overhauling the state’s marijuana regulatory structure will have to wait until next year, the governor said.

Among the biggest of the new changes are revisions to banking and advertising laws. With many legal marijuana businesses are still unable to access financial services, Newsom signed a bill (AB 1525) to remove state penalties against banks that work with cannabis clients.

“This bill has the potential to increase the provisions of financial services to the legal cannabis industry,” Newsom wrote in a signing statement, “and for that reason, I support it.”

Democrats in Congress, meanwhile, have been working for months to remove obstacles to these businesses’ access to financial services at the federal level. A coronavirus relief bill released by House Democratic leaders on Monday is the latest piece of legislation to include marijuana banking protections. Past efforts to include such provisions have been scuttled by Senate Republicans.

In his signing statement on the banking bill, Newsom directed state cannabis regulators to establish rules meant to protect the privacy of marijuana businesses that seek financial services, urging that data be kept confidential and is used only “for the provision of financial services to support licensees.”

Another bill (SB 67) the governor signed on Tuesday will finally establish a cannabis appellation program, meant to indicate where marijuana is grown and how that might influence its character. The system is similar to how wine regions are regulated.

Under the new law, growers and processors under the new law will be forbidden from using the name of a city or other designated region in product marketing unless all of that product’s cannabis is grown in that region. Similar protections already apply at the county level.

For outdoor growers, the new law recognizes the importance of terrior—the unique combination of soil, sun and other environmental factors that can influence the character of a cannabis plant. For indoor growers, it provides a way to represent a hometown or cash in on regional cachet.

Most of the other new changes that the governor signed into law are relatively minor and will likely go unnoticed by consumers. One, for example, builds in more wiggle room on the amount of THC in edibles (AB 1458), while another would allow state-licensed cannabis testing labs to provide services to law enforcement (SB 1244).

The bills were approved by state lawmakers earlier this month, as the state’s legislative session drew to a close.

Other pieces of cannabis legislation passed by the legislature this session were met with the governor’s veto. On Tuesday, Newsom rejected a proposal (AB 1470) that would have allowed processors to submit unpackaged products to testing labs, which industry lobbyists said would reduce costs. Currently products must be submitted in their final form, complete with retail packaging. Newsom said the proposal “conflicts with current regulations…that prevent contaminated and unsafe products from entering the retail market.”

“While I support reducing packaging waste, allowing products to be tested not in their final form could result in consumer harm and have a disproportionate impact on small operators,” Newsom said in a veto statement.

Those changes to testing procedures should instead be considered next year, Newsom said, as part of a pending plan to streamline California’s cannabis licensing and regulatory agencies.

“I have directed my administration to consolidate the state regulatory agencies that currently enforce cannabis health and safety standards to pursue all appropriate measures to ease costs and reduce unnecessary packaging,” he wrote. “This proposal should be considered as part of that process.”

Newsom also last week vetoed a bill (AB 545) that would have begun to dissolve the state Bureau of Cannabis Control, which oversees the legal industry. In a statement, the governor called that legislation “premature” given his plans for broader reform.

“My Administration has proposed consolidating the regulatory authority currently divided between three state entities into one single department,” Newsom wrote, “which we hope to achieve next year in partnership with the Legislature.”

Earlier this month, the governor signed into law one of the industry’s top priorities for the year—a measure (AB 1872) that freezes state cannabis cultivation and excise taxes for the entirety of 2021. The law is intended to provide financial stability for cannabis businesses in California, where taxes on marijuana are among the highest in the nation.

The state’s leading marijuana trade group, the California Cannabis Industry Association (CCIA), applauded the governor’s moves. All the bills approved by Newsom this week had the industry group’s support.

“We thank Governor Newsom for prioritizing these bills, which seek to reduce regulatory burdens, improve enforcement, expand financial services and enhance the state’s cannabis appellation’s program,” CCIA Executive Director Lindsay Robinson said in a message to supporters on Wednesday. “Like so many, the cannabis industry has faced a series of unexpected challenges and setbacks in 2020. We look forward to continuing to work with the Newsom Administration, and the Legislature, as we pursue a robust policy agenda in 2021.”

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Image element courtesy of Gage Skidmore

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