In case anyone didn’t already know it wasn’t allowed, California state regulators just put the kibosh on hopes for bars and pubs where people can consume both marijuana and alcohol. They also shot down the idea of producing beverages that blend the two substances together.
For now—or at least until state law changes to specifically allow it—any mixing of America’s two favorite intoxicants are prohibited in the country’s largest recreational marijuana market, according to a new memo issued on Wednesday by the state Department of Alcoholic Beverage Control (ABC).
Per to the document, published on the state’s Cannabis Portal website, it is currently illegal to:
*Sell cannabis and alcoholic beverages at the same location;
*Allow bar patrons to bring their own cannabis to an ABC-licensed location (such as a bar) and allow them to consume it (though there are many bars and pubs that turn a blind eye to such behavior, and did well before recreational marijuana was legalized in California);
*Infuse alcoholic beverages with cannabis that contains THC or CBD;
*And, consistent with earlier direction from the state Health Department, infuse alcoholic beverages—or any other edible product—with CBD that’s derived from “industrial hemp,” which, under state and federal law, is defined as cannabis sativa with less than 0.3 percent THC.
California voters legalized recreational marijuana for adults 21 and over in the November 2016 election. Before and after—for medical cannabis, and later, for recreational marijuana— state lawmakers authorized a slew of rules governing commercial cannabis activity, including how and where it can be consumed.
Despite that, there has been some lack of clarity—and in some cases, perhaps a bit of willful ignorance—among entrepreneurs and current marijuana-sales permit holders struggling to grab or maintain part of the market as to what, exactly is allowed.
At least one bar in San Francisco had put CBD-infused cocktails on its menu. And alcohol regulators have had to inform would-be brewers of CBD-infused beer that such a product is, for now, not allowed.
On top of that, state regulators had received so many “frequently asked questions” that they published the new memo, which is “intended to offer some guidance.”
“This is not intended to be a comprehensive review of what may be permitted or prohibited,” the document warns. “You should obtain independent legal advice before engaging in business involving either alcoholic beverages or cannabis, and you should not act in reliance on any information presented herein.”
The direction from the state will, for now, put the brakes on the kind of product innovation seen in other markets.
In Canada, where recreational marijuana sales are set to begin in October, at least one company is experimenting with brewing “cannabis beer,” but without alcohol. (So, in theory, it would be legal in California).
And in a state where marijuana consumption is treated casually, it is still technically illegal to consume cannabis in public in California. There are a few dispensaries that permit “on-site consumption lounges,” but these are rare and limited to primarily the Bay Area.
Other states have gone through this exercise. In Colorado, which along with Washington legalized recreational cannabis in 2012, there has been a push to allow licensed businesses to permit patrons to consume cannabis on-site. But that push took years, a chorus of demands from businesses owners, and another ballot initiative—Initiative 300, in Denver—before such conduct could be condoned.
Photo courtesy of Martin Alonso.
Colorado Sold Twice As Much Recreational Marijuana As Medical Cannabis Last Year
The share of legal marijuana sales in Colorado that came from the recreational market in 2018 significantly outpaced those from the medical market, according to an annual government report released on Monday.
In fact, there were about two times as many adult-use sales of flower compared to medical cannabis purchases—a new milestone for the state.
Colorado’s Marijuana Enforcement Division (MED) said that 288,292 pounds of bud were sold last year for recreational purposes, while 147,863 pounds were sold to medical marijuana patients. For comparison, in 2017, recreational consumers purchased 238,149 pounds and 172,994 pounds were sold to patients.
That means the recreational-medical gap increased 73 percent in one year.
In part, the trend can be attributed to the ongoing expansion of Colorado’s adult-use cannabis market since the state’s first recreational shops opened in 2014. Medical cannabis sales were notably higher than recreational sales in that first year of implementation, with just 38,660 pounds coming from the adult-use market and 109,578 pounds being sold to medical patients.
Medical and adult-use sales were roughly even in 2016. But by 2017, recreational sales accounted for 58 percent of the market. And last year, they represented 66 percent of the market.
MED also found that licenses for recreational marijuana facilities increased by three percent (47 licenses) while medical business licenses declined by eight percent (77 licenses).
“Data collection continues to be a priority at the MED,” Jim Burack, director of the program, said in a press release. “This ongoing analysis and compilation of industry information helps inform the public and contributes to our outreach efforts to stakeholders.”
The report also showed that the adult-use market is the primary destination for individuals purchasing edibles. Eighty-six percent of edible sales came from recreational consumers. And from July-December 2018, 75 percent of cannabis plants were cultivated for adult use.
The market shift isn’t unique to Colorado. An Associated Press analysis from June detailed how states across the country that have established recreational marijuana programs are seeing the number of medical patients decline as more consumers transition to the adult-use market.
That may be partially explained by individuals who sought out medical cannabis recommendations choosing not to renew their registration after recreational marijuana shops became available. To that point, a recent study found that many customers at recreational dispensaries are consuming cannabis for the same reasons that registered patients do, such as to alleviate pain and sleep issues.
The concern for some advocates, however, is that adult-use legalization could drive up prices for patients, or leave them with fewer product options tailored to therapeutic use as demand for high-THC products increases.
“When states pass adult-use legalization we are seeing many patients leave the strict controls of the medical programs,” David Mangone, director of government affairs at Americans for Safe Access, told Marijuana Moment. “Patients must already pay out of pocket for cannabis, and any added cost like a registration fee for a medical card or renewal can make the process of obtaining medicine extremely burdensome and costly.”
“States like Colorado must continue to provide adequate benefits to patients to ensure the medical program remains robust,” he said.
Mangone added that “as states pass adult-use programs it is important that they continue to understand and appreciate the needs of patients.”
“A common frustration for many is not what happens in terms of access to cannabis, but rather what happens in terms of access to specific products. Products and flower with a high-THC content have a wider market appeal, but may not necessarily benefit the existing medical market.”
That said, one interesting finding from this latest MED report is that medical and recreational consumers alike seem increasingly interested in concentrates, with the units of such products sold to both nearly doubling from 2017 to 2018. Concentrates are sold at a much higher rate in the adult-use market, but the potent products evidently have growing appeal across the board.
Gov. Jared Polis (D) recently celebrated tax earnings from marijuana sales, touting the fact that the state has amassed more than $1 billion in cannabis revenue that has been allocated to various social programs.
And the marijuana market is continuing to evolve in state. Polis signed legislation in May allowing for home deliveries of cannabis products as well as social consumption sites.
The governor said last month at a conference with governors from around the country that the new delivery law could help mitigate impaired driving.
Photo courtesy of Kimberly Lawson.
Credit Unions Won’t Be Punished For Working With Marijuana Businesses, Federal Regulator Says
Regulators won’t punish credit unions simply for working with marijuana businesses that are operating in compliance with state laws, the head of the federal agency that oversees the financial services providers said in a new interview.
National Credit Union Administration (NCUA) Chairman Rodney Hood also suggested that Congress could entirely resolve banking issues in the cannabis industry by federally descheduling marijuana.
“It’s a business decision for the credit unions if they want to take the deposits,” Hood told Credit Union Times, adding that the financial institutions must follow existing federal guidance and ensure that the businesses they choose to service are not violating anti-money laundering laws or other rules.
“We don’t get involved with micro-managing credit unions,” he said.
While the comments don’t signify a new shift in policy, and don’t take into account the fact that the Justice Department still maintains authority to potentially prosecute credit unions that allegedly violate the law by banking marijuana proceeds, they are the latest indication of a growing consensus that federal action is needed to clarify the situation.
Uncertainty around banking in the state-legal marijuana market has been a hot topic in the 116th Congress.
Legislation that would shield banks and credit unions that take on cannabis clients from being penalized by federal regulators was approved by the House Financial Services Committee in March, and the Senate Banking Committee held a hearing on the bill last month. That panel’s chair, Sen. Mike Crapo (R-ID), said last week that he agrees a solution for the industry is necessary.
Though the NCUA head didn’t endorse specific legislation to give credit unions peace of mind when dealing with cannabis businesses, he did float the idea of descheduling marijuana as one way to provide unambiguous clarity for financial institutions.
“Hood said that Congress could remove all ambiguity if it enacted legislation to declassify marijuana,” the trade publication reported after its interview with the official.
Separately, the independent federal agency recently took one proactive step toward reforming policy partly in response to state-level legalization efforts. In a notice published in the Federal Register last week, NCUA proposed changing its rules so that individuals with prior low-level drug convictions would be allowed to work at credit unions.
Though bank and credit union representatives are calling for enhanced clarity when it comes to cannabis banking, more financial institutions do seem willing to take the risk anyway, with federal data showing a notable uptick in the number of marijuana-servicing banks in the last quarter.
More Than 100 Marijuana Businesses Urge Congress To Include Social Equity In Legalization
A coalition of more than 100 marijuana businesses and industry associations sent a letter to congressional leadership on Thursday, pressing them to ensure that any cannabis reform legislation include provisions promoting social equity in the industry.
The letter describes the evolution in public opinion around marijuana policy, the mass incarceration implications of prohibition and the economic potential of legalizing and regulating cannabis. It makes the case that as Congress considers various proposals to change federal marijuana laws, the work won’t be complete with the mere end of prohibition.
Specifically, the signees say they are concerned that individuals from communities disproportionately impacted by the war on drugs are being “left behind because a previous [cannabis] conviction often is a disqualifying factor to become an owner or employee in the new legal ‘green-rush'” and also because “they are unable to come up with the capital necessary to break into the industry.”
“In 2018, combined sales of regulated medical and adult-use cannabis topped $10.4 billion, and the 7 states with active adult-use markets generated nearly $1.2 billion in tax revenue. The industry is now employing well over 200,000 people,” the letter reads. “And yet, with this rapidly growing new industry and broad popular support for legalization, many of the communities who were devastated by the decades-long War on Drugs are now being left behind.”
The coalition made a series of policy recommendations that aim to level the playing field and repair the social and racial harms of the drug war.
For example, the businesses said that, beyond federally descheduling marijuana, lawmakers should allow banks to service state-legal cannabis businesses, fund social equity programs to encourage those targeted in the drug war to participate in the legal market, clear the records of individuals with prior marijuana convictions and invest in efforts that lift up impacted communities.
Signees include the Minority Cannabis Business Association, National Cannabis Industry Association (NCIA), Marijuana Policy Project, Americans for Safe Access, Michigan Cannabis Industry Association, Harborside, Berkeley Patients Group, Arcview Group, MJ Freeway, Greenbridge Corporate Counsel, SPARC and 4Front Ventures, which led the letter.
“I feel the cannabis industry has a moral obligation to ensure that communities and individuals who were harmed the most by prohibition do not lose out yet again as we forge these new economic opportunities,” said Mike Liszewski, 4Front’s senior regulatory affairs counsel and the chief organizer behind the letter, said in a press release.
“There are many who would argue that Congress should not get into the business of picking winners and losers,” the businesses wrote.
“We would argue that if Congress chooses to end federal cannabis prohibition but chooses not to address these glaring racial and economic disparities in the process, it will in fact pick those who are already the most well-financed, the least likely to have suffered an arrest and conviction, and almost certainly do not come from the communities that were severely harmed by decades of prohibition to be the winners of the new economy.”
The letter comes one week after the House Judiciary Crime, Terrorism and Homeland Security Subcommittee convened for a historic meeting on ending federal marijuana prohibition, where witnesses and members discussed how to chart the best path forward toward legalization.
“As representatives of the legal cannabis industry, we have a responsibility to help undo the harms caused by prohibition and ensure that people most impacted by failed federal policies have access to the opportunities being created every day in this market,” Aaron Smith, executive director of NCIA, said in a statement. “We are pleased to join this distinguished group of business leaders and advocates in calling on Congress to incorporate these ideas into legislation.”
“Past Congresses have played a major role in marginalizing people of color through the war on cannabis, and it is the duty of current and future lawmakers to make up for this,” Smith said.
On a related note, a separate coalition of civil rights and drug reform groups, including the ACLU, was formed last week and released a letter making similar social justice recommendations for federal cannabis legislation.
“Some in Congress may feel it is too soon to end federal cannabis prohibition or that Congress does not have a responsibility to address the harms created by how this policy has targeted certain communities,” the new letter from the businesses and industry groups states. “But if Congress declines to harmonize state and federal cannabis laws or fails to take responsibility for the consequences of disproportionate enforcement, the problems caused by prohibition will continue to persist.”
“The time to wait and see is over,” they wrote. “Now is the time for Congress to take the bold but ultimately pragmatic step to deschedule cannabis along with approving the necessary funding and programming to support the communities that incurred the most harm because of federal prohibition.”
Read the full letter from cannabis industry groups below:
This piece was updated to include comment from Liszewski.
Photo courtesy of Mike Latimer.