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California Clamps Down on Black Market Pot Operations

As the black market for pot sales shows little sign of slowing, Californian authorities have notably increased enforcement action against illegal cannabis traders. Over the last 12 months, raids by law enforcement on black market pot businesses have increased threefold, when compared with similar activity conducted in the year prior. As a result, unlicensed pot […]

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As the black market for pot sales shows little sign of slowing, Californian authorities have notably increased enforcement action against illegal cannabis traders. Over the last 12 months, raids by law enforcement on black market pot businesses have increased threefold, when compared with similar activity conducted in the year prior. As a result, unlicensed pot growers and sellers have seen a total of $30 million worth of cannabis products seized. But even amid this additional ramp up, cannabis industry insiders say even more activity is needed to curb illegal pot sales across the Golden State.

For context, in 2018 local law enforcement worked in conjunction with the state Bureau of Cannabis Control, and together they served six unlicensed cannabis businesses with search warrants. These raids resulted in the seizure of more than 1,500 pounds of marijuana, said to carry a street value of $13.5 million.

Calilfornia Cannabis Business Licensing Lawyers

Comparatively, according to data release in July, within the first half of 2019 alone, the bureau had already served 19 search warrants to unlicensed sellers. Those raids were successful, and saw more than $16.5 million worth, or about 2,500 pounds of illicit marijuana, confiscated. Just shy of $220,000 cash was also seized from cannabis businesses operating illegally during this time.


Proposition 64, which came into effect in November 2016 and permits adult possession (up to an ounce) of marijuana for personal use, was intended to curb the illegal pot market. But so far, this has not been the case. Research firm New Frontier Data estimated the marijuana black market in California was worth $3.7 billion last year alone, which was four times higher than the lawful market.

To help tackle the issue of illegal pot retailers, Governor Gavin Newsom recently threw extra support behind current law enforcement crackdowns. In July, the Governor approved $30,000-a-day fines for cannabis growers, sellers and distributors, who operate throughout California without a license.

Despite this emphatic deterrent, Lindsay Robinson, the California Cannabis Industry Association executive director, says unlicensed retailers, who number in the thousands, continue to operate illegally throughout the state, and many even feel comfortable enough to advertise their businesses.

State officials have conceded they’ve run into problems while working to issue new licenses in the cannabis market. Obstacles such as cities refusing to permit marijuana sales, as well as local and state taxes raising the price of legal marijuana by approximately 45%, have both contributed to an unexpected thwarting of the legal market.

Another challenge for the bureau appears to be staffing. The state’s Department of Finance recently conducted a recent audit which found, the bureau is not properly resourced to handle all the activity it endeavors to fulfill. California has had a year to establish a new bureau that drafts regulations and procedures relating to the legal cannabis market. But auditors reported that only 15 of the Enforcement Unit’s 68 authorized positions had been filled.

Given the Enforcement Unit’s current staffing configuration, “the Bureau’s ability to process complaints, perform inspections and investigations, and review and inspect testing laboratories is severely impacted,” the audit said.

Trade groups in particular have voiced their disappointment, following the unveiling of the new state budget recently signed by Newsom. As it stands, the budget fails to include an industry proposal suggesting an addition of $10 million. That allocation would fund a clamp down on retailers operating without a license, and assign sworn peace officers to follow up by enforcing the law.

Legal Implications Thus Far
It remains to be seen whether continued crack down efforts by law enforcement will ultimately deter illegal marijuana businesses. Industry stakeholders will be pulling for law abiding cannabis outfits to benefit from running above board businesses, by way of increased market share.

Need Legal Help Obtaining or Renewing a Commercial Cannabis Business License?
Our Los Angeles cannabis business licensing lawyers can help answer any questions you may have.

The Los Angeles CANNABIS LAW Group represents growers dispensaries, ancillary companies, patients and those facing criminal marijuana charges. Call us at 714-937-2050.

Additional Resources:
Proposition 64
California Bureau of Cannabis Control
California Cannabis Industry Association

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California cannabis attorney

Expectations for California Cannabis Law in 2021

Trying to predict the California cannabis market was problematic even prior to an international pandemic that threw everything off course. Part of it is that this is the largest legal marijuana market in the world. Part of it is that it’s so new, being legalized for adult recreational use just three years ago. And part […]

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Trying to predict the California cannabis market was problematic even prior to an international pandemic that threw everything off course. Part of it is that this is the largest legal marijuana market in the world. Part of it is that it’s so new, being legalized for adult recreational use just three years ago. And part of it is the industry’s ongoing and fierce competition with a huge illegal market – all while the drug is considered illegal and highly addictive by the federal government.marijuana business lawyer

That said, our Los Angeles marijuana business lawyers have been fierce defenders of those involved in cultivating, manufacturing, selling, using, prescribing and advertising marijuana for more than a decade. We have become deft at examining the trends as we advise our clients, many of whom were better off than some other businesses due to their designation by the state as “essential.”

In looking at the year ahead, our marijuana lawyers see a handful of factors that will likely impact the future of the industry and the clients we serve.

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California cannabis attorney

California Proposes Regulations for Appellations of Origin for Cannabis

Regulations were proposed by the California Department of Food and Agriculture (CDFA) last month, suggesting that appellations of origin are established for cannabis. As such, February 20 marked the beginning of the 45-day period required by Californian law, where the public can submit any comments it may have on the matter. The CDFA has continued […]

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Los Angeles marijuana tax lawyerRegulations were proposed by the California Department of Food and Agriculture (CDFA) last month, suggesting that appellations of origin are established for cannabis. As such, February 20 marked the beginning of the 45-day period required by Californian law, where the public can submit any comments it may have on the matter. The CDFA has continued to welcome and encourage all interested to submit their thoughts. The deadline to do so is April 6, 2020.

Background
Under Section 26063 of the Business and Professions Code, The Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), requires that the CDFA Cultivation Licensing Division, also known as CalCannabis:

  • Forms standards that allow licensed cannabis growers to elect a county of origin for their cannabis; and
  • Establishes a process that licensed cannabis growers can use to establish appellations.

The department has until January 1, 2021 to form the process of appellations of origin. In order to meet this statutory obligation and to fulfill MAUCRSA mandated responsibilities, the department has created what is now know as, the Cannabis Appellations Program (CAP).

Back in 2018, to kick start the gathering of input and feedback from industry stakeholders, the CDFA hosted six public participation sessions right across the state. During each session, the members of the public were given time to contribute their thoughts. And as CAP has continued to develop, the department has also kept lines open with industry experts and associates, throughout.

What is an appellation of origin?
An appellation of origin is a description that both distinguishes and protects the place in which a product originated, as well as the process by which that product was made.

There are two major aims of the CDFA’s Cannabis Appellations Program:

  • To promote cannabis products and local businesses within a particular region; and
  • To improve overall consumer confidence, achieved via offering assurances related to a cannabis’ specific traits, quality and place of origin.

Once complete, the process should clearly outline all practices, standards and specific cannabis varieties produced by selective breeding in select areas of California.

What changes are being proposed?
Within Title 3 of the California Code of Regulations, the CDFA has suggested the state amends Chapter 1 and adopts Chapter 2. These changes aim to establish a protocol for creating cannabis appellations of origin, as well as add clarity for cultivators on how they can use the county of origin to help promote their products.

Our Orange County marijuana business lawyers also encourage anyone within the cannabis community to share their comments on the proposed regulations. They can do so either:

  • Via email to CDFA.CalCannabis_Appellations@cdfa.ca.gov;
  • Verbally or in writing during the public hearing Tuesday, April14, 2020 from 1-3pm at 1220 N Street, Sacramento, CA, in the CDFA Auditorium; or
  • By mail to the California Department of Food and Agriculture, Attn: Kristi Armstrong, CalCannabis Cultivation Licensing, Proposed Appellations Regulations, P.O. Box 942871, Sacramento, CA, 94271.

Implications
Following concern surrounding product safety that emerged amid the vaping crisis last summer, consumers have rightfully become increasingly concerned about product quality. By establishing a process within the system that clearly signals to consumers where cannabis is grown, and how it was cultivated in any one particular area, will certainly bring an added level of consumer confidence. Initiatives such as these are big positives for licensed cannabis growers and sellers across the board.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.

Additional Resources:
The Medical and Adult-Use Cannabis Regulation and Safety Act

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California cannabis attorney

California Allows Cannabis Donations to Qualified Medical Patients & Caregivers

As of March 1, 2020, California has allowed qualified medical marijuana patients and primary caregivers to receive free cannabis, donated by retailers. This welcomed update arose after the passing of Senate Bill 34, which is also responsible for exempting donated cannabis items from cultivation, sales and use, and excise taxes. The bill states licensed growers, […]

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medical marijuana attorneyAs of March 1, 2020, California has allowed qualified medical marijuana patients and primary caregivers to receive free cannabis, donated by retailers. This welcomed update arose after the passing of Senate Bill 34, which is also responsible for exempting donated cannabis items from cultivation, sales and use, and excise taxes.

The bill states licensed growers, distributors, manufacturers, retailers and micro-businesses may allocate any already available inventory of cannabis and related marijuana products, for donation. Products set aside for donation can only be given by licensed retailers either directly to a medical patient, or to their primary caregiver.

Donation Requirements
Our Los Angeles marijuana attorneys note that all cannabis and related products allocated for donation, are required to meet state marijuana regulations and provisions outlined in MAUCRSA. Those include:

  • All donated marijuana products must travel within the licensed supply chain and meet all requirements surrounding cultivation, laboratory testing, distributing, manufacturing, and labeling and packaging, etc.
  • Cannabis products that fail to meet regulatory testing and compliance standards are not permitted for donation.
  • Donated marijuana products may only be made to qualified medicinal patients, and may only be donated by licensees permitted for retail sales, or non-profit organizations working directly with such licensed retailers.

Additionally, any licensee allocating items for donation must record each allocation within the Track-and-Trace system, as well as on sales receipts and invoices. Once a donation designation has been made, it cannot be changed. Any licensee that does try to change a donation allocation will have to pay sales and use taxes, and may also suffer disciplinary action. Manufacturers wishing to donate cannabis products must also label products “FOR MEDICINAL USE ONLY.”

Retailer Requirements
Section 11362.7 of the Health and Safety Code states that retailers can only donate cannabis and related products to medical marijuana patients, or their primary caregivers, who possess a valid medical marijuana  ID card, or recommendation from an attending physician.

Should a medicinal patient not hold a valid ID card, before donating any marijuana, the retailer must first:

  • Verify the attending physician recommending the medical marijuana therapy is licensed, and in good standing, to practice osteopathy or medicine within the state of California. This must be verified with:
    • The Medical Board of California;
    • The Osteopathic Medical Board of California; and
    • The California Board of Podiatric Medicine.
  • Take a copy of a government issued identification for the patient or primary caregiver; and
  • Provide a written certificate stating the retailer has verified a physician’s medicinal marijuana recommendation, accordingly.

Daily Purchase and Possession Limits
The Bureau of Cannabis Control (BCC) has clearly outlined daily purchase (Section 5409) and possession limits (Section 11362.77) within the Health and Safety Code. It is important to note that these limits still apply, both to patients and caregivers who may be receiving, or carrying, donated medicinal marijuana.

Implications
Making marijuana donations to medical patients, and their caregivers, shows the industry’s compassion for those most in need. Offering cannabis business owners and operators tax incentives to get on board also helps to sweeten the act of donating. What will be interesting to watch is whether it will prove too cumbersome for retailers to jump through the hoops needed to get sign off to donate to those without a valid medical marijuana ID card, or whether they will do so gladly.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.

Additional Resources:
Senate Bill 34
The Medical and Adult-Use Cannabis Regulation and Safety Act
Bureau of Cannabis Control – Health & Safety Code

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