California’s licensed cannabis operators are readying themselves for the adoption of permanent regulations, which are expected to be revealed in the next few weeks. For legal operators, finding product in the current emergency regulatory environment has proven to be difficult. The pending release of regulations has culminated in a collective sigh of relief, peppered with a fair bit of trepidation, as the underpinnings of both statutory and regulatory rules evolve into a tangible foundation.
Tangible, however, does not necessarily qualify as practical or even readily achievable.
To qualify the challenges faced in this regulatory environment, a brief history will provide some context. In 1996, Proposition 215 passed, which made medical marijuana accessible to qualified residents of California, while simultaneously promoted California as the leader of state marijuana reform. Fast Forward to 2015. 2015 saw the passage of the Medical Cannabis Regulation and Safety Act (MCRSA). This created a pathway to regulation, but it was not until a year later when Proposition 64, the Control, Regulate and Tax Adult Use of Marijuana Act passed that the state engaged in the process and began to consider regulation.
Regulators now found themselves working under a tight deadline to regulate a $2B marketplace they did not understand, a market that had self-regulated for almost two decades.
It has been a race to permanent regulations ever since and many problems persist that have no means of a timely resolution. The expectation of permanent regulations is that they will closely mirror the existing emergency regulations, with a few small changes and/or clarifications throughout.
From a cannabis manufacturing perspective, one major change the state is expected to accommodate relates specifically to the way vape cartridges are tested. Currently, as a manufactured product, these cartridges are to be tested in their final packaging. The issue is, these small cartridges are not made to be opened, so pulling samples out of these is not only wasteful but dangerous to the lab technician trying to open the fragile metal and glass cylinders.
The new regulations will also reflect a reversal in original policy as it relates to delivery. This change, implemented at the beginning of June 2018, puts the interests of non-licensed technology companies into a powerful position in California’s cannabis delivery market. This highly contested change reveals the dynamics of an industry that is so large and consequential that the economic ramifications extend far beyond the industry itself. The political influence of ancillary market sectors, from insurers to technology providers, has proven powerful and potentially fractious.
Additionally, several definitions will be refined and perceived loopholes closed, but many of the larger problems that echo across the supply chain are statutory in nature. These issues, revolving around distribution, tax collection, child-resistant packaging and testing validation protocol, will prove the biggest challenges for operators in the near-term. Challenges related to these topics will continue to plague licensed operators and fuel the illicit marketplace which, by some estimates, has tripled in size since January 2018.
The good news, however, is that cannabis industry leaders are working closely with state legislators and regulators to address these challenges. The Bureau of Cannabis Control, the California Department of Public Health and the California Department of Food Safety and Agriculture’s Calcannabis division are working tirelessly with organizations like the California Cannabis Industry Association to push forward towards a normalized market built on practical regulation.
It is an issue that impacts countless small business owners like myself who are eagerly awaiting a firm resolution. A permanent set of regulations will allow for the maturation of the cannabis industry in California, which is the ultimate goal.
Christopher Coggan is CEO of Therapy Tonics & Provisions, Inc. He is chairman of the California Cannabis Industry Association Manufacturing Committee and board member of both the San Diego Cannabis Delivery Alliance and San Diego Cannabis Industry Association. Christopher can be reached at firstname.lastname@example.org or 858-864-8959.