Legislative Reaction: Industry Responds to New California Regulations

In what most are calling a landmark development not only for state regulation of the industry but for its potential impact on the  national debate, lawmakers in California passed the Medical Marijuana Regulation and Safety Act on Sept. 11, 2015. It is being hailed by businesspeople and advocates alike as the most significant medical marijuana law in the state in almost 20 years.

As Nate Bradley of the California Cannabis Industry Association said, “After 20 years without state-wide regulations, the California Legislature has taken an important first step in creating a legal framework for medical cannabis. The biggest winners are patients, who can expect a safer, more professional industry backed by independent testing of cannabis products and environmental regulation.”

According to Tim Schick, Executive Director of the Berkeley Patients Group,“The establishment of this comprehensive regulatory framework will benefit the patients, the environment, the economy, and all Californians for years to come.” Schick also added, “This historic action is a major step forward for the state of California and the cannabis industry at large. As the largest state in the nation, establishing a comprehensive policy in California will continue to push the national debate about marijuana law reform forward.”

“Now we have that we have a very robust system California will rightfully take its place as the true silicon valley of pot,” said Aaron Herzberg, a strategist, attorney and entrepreneur specializing in the emerging cannabis industry. “Under the new law marijuana dispensaries and cultivation sites in California are now fully legalized as opposed to previously being in a grey legal area known by lawyers as an ‘affirmative defense.’ This law also allows the industry to take profits for the first time. That’s huge. Until now the state required marijuana dispensaries and other businesses to be run as a non-profit or a collective.”

Despite the fact that California’s voters went to the polls in 1996 to legalize medical use, further regulation of the industry has been stalled in vicious political fights, not to mention complicated by federal raids and prosecutions ever since. As a result, California’s market, although huge and probably the country’s largest medical market, was, until this month at least, a hodgepodge of municipal regulations that left many feeling frustrated if not vulnerable.

The legislation will now pass to Gov. Jerry Brown who is expected to sign it into law.

According to Kris Krane of 4 Front Advisors, “It is a welcome sign that, nineteen years after the passage of Prop 215 in California, the state is finally moving to enact regulations for the cannabis industry. Lack of regulations in California has led to a patchwork of local rules, or lack of rules, that made navigating the California market virtually impossible and put business owners at greater risk of federal interference.”

Julianna Carella of Auntie Dolores, a California-based edibles company was also pleased with the passage of the bill. “We as edibles manufacturers are really excited that some medical cannabis regulations are finally in place for California, and we also look forward to providing further input as we see room for improvement.”

Derek Peterson, the CEO of Terra Tech (OTCQX: TRTC) said, “We are very pleased that the Legislature specifically provided for the inclusion of publicly traded companies for participation and regulation in its new medical marijuana regulatory structure. We are also happy they provided for extraction, which gives patients access to multiple forms of medicine.”

That said, Krane, like many others, is still worried about how the imposition of the new regulations will affect the industry as a whole. “What we don’t know is how these new regulations will impact the industry in the state moving forward,” he said. “At first blush this is a very complex piece of legislation that will take a long time to fully understand. There is no doubt that some existing businesses will face difficulties complying with the new regulations. Hopefully the state of California will be flexible in adjusting these rules as the program advances in order to adjust to the realist use of implementation and compliance.”

Likewise Carella is also concerned about the lack of clarity in the language regarding edibles. “An edible medical cannabis product is not considered food, or a drug,” she said. “This obviously puts manufacturers like us in a very confusing spot without being considered a food or a drug, when in fact we are both. There are certainly ways to expand on this to accommodate our very diverse industry and all the producers that have been innovative with product development, much of which comes directly from the wishes of medical cannabis patients.”

This is not the only thing the law does not address. It is also has vague language about large farm licenses, which will be allowed but limited. Potency and purity standards haven’t been specified yet either, but there will be mandatory lab testing for potency, pesticides and molds.

All in all, despite the work still left to do, the feeling in California is optimistic. As Bradley said, “Our expectation is that California will now be able to take its rightful place as the center of investment and innovation in the cannabis economy. Governor Brown and his colleagues in the legislature have just given the green light to let California’s cannabis industry become the thriving, tax-paying, job-creating industry it was always destined to become.”

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