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 949-375-4734. Additional Resources: The Medical and Adult-Use Cannabis Regulation and Safety Act

Since its passing in 2016, Prop 64 has earmarked its entire cannabis industry tax revenue, minus regulatory costs, to supporting public health, repairing the environment, and bettering public safety.

New parks, healthier children, broader educational opportunities, forest clean ups, drugged drivers removed from the roads, and criminal records cleared are just some of the areas already seeing big improvements thanks to Prop 64 tax revenue contributions.

And this is just the beginning. In mid January this year, Gov. Gavin Newsom proclaimed another $332.8 million in cannabis tax revenue would be allocated to social services for the 2020-2021 fiscal year.

The holistic Prop 64 picture is vast (its impact data spans more than a dozen state agencies, and countless local counterparts) and challenging to appreciate in its entirety. So with this article, our business cannabis lawyers aim to highlight some of the key initiatives already benefiting a great deal.

Recapping California’s Cannabis Tax Rates

• A 15% state retail sales excise tax
• A cultivation tax of $9.65 (raised from an initial $9.25)
• A state sales tax of 7.25% on retail cannabis sales, plus up to 1% local sales tax
• Local cannabis business taxes, ranging from 0% up to 15% (San Francisco has no local cannabis excise tax, whereas Oakland is 10%.)

Marijuana Tax Revenue Expenditures in California (Fiscal Year 2019-2020)

Once research and regulatory costs have been addressed, the remainder of funds are dispersed as follows:

• 60 percent to youth-focused anti-drug programs;
• 20 percent to environmental conservation; and
• 20 percent to public safety initiatives.

In year one alone (2019-2020), those disbursals totaled approximately $200 million. Given the cannabis tax increase introduced in 2019, fiscal year 2020-2021 allocations have also increased, now reaching $332.8 million.

$140.8 Million Covered Childcare for 11,000 Low-Income Children

The National Conference of State Legislatures states that for each dollar spent on child care and early education, society receives $17 in benefits.

In 2019-2020, 8,700 children in low income families received child care vouchers, allowing their parents to continue going to work. The 2019-2020 budget notes that this kind of initiative is so important because it helps keep kids engaged and occupied in a safe place, while mitigating the likelihood of their becoming involved with drugs.

Since the Great Recession, this program has suffered severe budget cuts on three separate occasions. With the help of Prop 64 funding, only now is the program returning to levels it maintained as far back as 2008.

A Quick List of Benefits Californians Enjoy Thanks to Prop 64 A snapshot of other sizable takeaways to note when recapping the impact Prop 64 tax revenue has already made, include:

• The scope of childcare assistance will increase in the 2020-2021 fiscal year, with Prop 64 providing $140 million to cover childcare for 11,000 children from low-moderate income families
• Cities that allow dispensaries will receive $44.8 million in grants to support public health and safety initiatives
• $39.9 million will be allocated to help combat illegal cannabis grows and to restore damaged wildlands
• In 2019 alone, Tulare County received $25.3 million to help facilitate the removal of meth, guns, herbicides and trash
• The DHCS is committed to countering health impacts for growing up a low-income minority. One program idea currently under consideration could see legal marijuana tax revenue used to employ released prisoners to help deter juvenile offenders.
• Social workers could see $30 million reinvested into their local communities
• $21.8 million has been earmarked to help establish safer roads
• Prop 64 asked the legal marijuana industry to pay its own costs, and it has. This year Prop 64 taxes paid for three state agencies. $57.8 million has been allocated to continue licensing and regulating the industry in fiscal year 2020-2021.
• $15 million has been carved out for science and policy research
• Through the 1 to 15 percent local cannabis business tax, legal cannabis taxes are also quietly paying for cop cars, new parks and ambulances throughout California. $100 million has been allocated to continue doing so in 2020-2021.

Legal Implications Its clear that many different sectors throughout the state of California have benefited greatly from the tax revenue generated by legalized marijuana.

It is important that the legal cannabis industry continues to receive support from legislators in making up ground on the illicit market. And the better the legal market does, the farther tax dollars generated can reach back to help improve day to day life for tens of thousands of people in local communities across the state.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: Proposition 64

In December, California investigators also raided unregulated storefronts throughout Los Angeles and confiscated illegal vape products. According to state testing results, many of those products showed as far less potent than labeling suggested.

In some cases, the oil cartridges THC contents showed to be only a portion of that claimed and were diluted more than one-third by undisclosed but likely dangerous additives.

Los Angeles officials tested a sample comprising more than 10,000 randomly selected illegal vape pens confiscated in those raids. Results showed three in four vapes contained the thickening agent vitamin E acetate, which federal regulators blame for the majority of lung illnesses linked to the national vaping health crisis.

“The prevalence of dirty and dangerous vape pens at unlicensed cannabis stores demonstrate how important it is for consumers to purchase cannabis goods from licensed retailers, which are required to sell products that meet state testing and labeling standards,” said Lori Ajax, head of California’s Bureau of Cannabis Control (CBCC).

Regulated Vape Products Are Safe According to the CBBC, to date, not a single vape disease case in California has been linked to a state-regulated source. Our Orange County marijuana lawyers believe test results show the source of the vaping health crisis stems from illegal manufacturers contaminating unregulated products on the illicit market.

Some confusion may exist among consumers, however, as the Centers for Disease Control and Prevention (CDC) fell short of evaluating the safety of regulated vape products. Instead, 16 percent of vape lung illness cases were linked by the agency to “commercial” sources which it deemed to include all “dispensaries, vape and smoke shops, stores and pop-up shops” without making the clear distinction between state legal and regulated outfits from unlicensed, illicit operations.

The licensed cannabis industry responded promptly and responsibly to the vape health crisis by quickly calling for tighter vape product regulation.

Federal Laws Restrict Research Efforts Because federal laws dating back to the 1970’s restrict researchers from studying the medicinal benefits of cannabis — still classified as a Schedule 1 drug, which by definition possesses no currently accepted medical use, plus poses a high risk for abuse — should a researcher in California wish to conduct investigations on cannabis use, those researchers would be at risk of federal charges, even though the state of California permits the legal use of cannabis.

Scientists widely believe this stance prevents the research community from conducting the high level of research required to secure an FDA approval for cannabis, even though early research indicates marijuana might even serve as a favorable alternative to opioids and other medicines.

Legal Implications If the United States were to legally regulate marijuana vaping products, as do countries like the United Kingdom, then the vaping health crisis may well disappear.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: California’s Bureau for Cannabis Control U.S. Controlled Substances Act (Title 21 U.S. Code)

Fake THC Cartridges Are Flooding California Of all counterfeit cannabis products, refillable THC cartridges used inside vaping pens are currently most common. Surprisingly, states like California – where recreational cannabis use is legal – appear to be most flooded with counterfeit products. Big brands like Kingpen and Rove have tried to get ahead of counterfeits by repackaging their products, but counterfeits have shown they can keep pace, often reproducing new packaging almost as quickly as the legitimate brands.

And industry insiders unanimously agree, the fakes are getting better all the time. Many knockoff THC vape pens are comprised of illegally but locally grown cannabis, which producers then stuff into refillable cartridge pens, before attaching counterfeit labeling they’ve purchased online, and selling the finished counterfeit pens at discounted prices to illegal pop up shops. To most consumers and law enforcement officials alike, it’s very difficult to tell a real pen from a fake one.

The best way for brands and businesses to protect against counterfeits is to legally trademark cannabis products. Once cannabis companies have a trademark in place, Californian authorities then have jurisdiction to enforce against counterfeits. Without a trademark though, it’s very difficult to prosecute. If you need help trademarking your cannabis products, our marijuana business lawyers of Orange County can help.

A Budding Counterfeit Scene All across California, legitimate cannabis businesses are feeling the pinch. The problem is so wide spread that brazen bootleggers are even advertising counterfeit products on Instagram and Snapchat. An admin for DanksOfficial – a watchdog Instagram account cautioning marijuana users against buying THC cartridges on the black market – who prefers to remain anonymous, says unless consumers can test each cartridge, there’s no way to be sure a vaping cartridge is real or safe. Experts Warn of Health Risks Counterfeits Pose Just as vaping is increasing in popularity across the nation, associated long-term health risks are also becoming increasingly clear. The Center for Disease Control and Prevention (CDC) recently announced that 193 cases of severe lung illness, all possibly linked to vaping, have propped up across 22 states. While the CDC did not share exactly how many cases involved products containing THC, Dr. Illeana Arias, senior scientific advisor and acting deputy director for non-infectious diseases noted “in many cases” patients had confirmed using THC-containing products prior to feeling unwell.

Meanwhile, the California Department of Public Health (CDPH) recently stated as many as 28 cases of acute lung disease among people who recently vaped cannabis products, had been reported across the Golden State. Just this August, the CDPH issued a health alert in Kings County after a cluster of hospitalizations. Between July and August, seven healthy adults were admitted to county hospitals, all showing signs of severe pulmonary disease, after vaping THC products. Nancy Gerking, Kings County assistant director of public health, confirmed the products were all purchased from temporary, unlicensed pop-up shops in the local area.

At about the same time, we also saw the Bureau of Cannabis Control (BCC) launch a public awareness campaign warning consumers about the health risks associated with buying marijuana products from unlicensed dispensaries. That’s because knock off products are completely unregulated and avoid testing for pesticides or other contaminants, which can pose dangerous health risks.

Other industry insiders note, because licensed cannabis growers and businesses cannot distribute their goods to unlicensed stores without risk of suffering heavy fines from regulators, if big brand name products are showing up in unlicensed stores, then those products are almost always fake. Consumers can best protect themselves from subpar goods by buying all cannabis products from licensed, registered cannabis businesses. To check if a California cannabis dispensary is legitimate and meets the state’s high safely standards, enter their business name into the BCC online license search tool (www.CApotcheck.com). Be sure your retailer is listed there, before shopping.

Marked Down Knock Offs Bringing in Big Bucks The state’s registered marijuana operations are projected to make more than $3 billion combined this year. But that number is easily overshadowed by the $8.7 billion in revenue expected to be generated by the unregulated cannabis industry across California in the same time frame.

Legitimate cannabis business operators are at pains to compete. It is widely believed that counterfeits are boosting unlicensed dispensary sales, where business owners can afford to sell cannabis products at lower prices, because they’re skipping out on regulation costs and avoiding taxes.

Authority Clampdowns Showing Signs of Success The Los Angeles Police Department is making strides in limiting the rampant illegal cannabis trade. At the beginning of the year there were almost 300 illegal dispensaries operating in the Los Angeles area, compared to less than 200 today. With authorities primarily focused on closing unlicensed dispensaries, clamping down on counterfeit products is not yet a priority.

Rather than issuing search warrants that could lead to seizing knock off cannabis items, the LAPD is focused on first cutting water and power to properties hosting illegal cannabis activity. While this is a strong first step, some fear counterfeit products not seized when closing down illegal operations, can easily circulate somewhere else down the road.

Legal Implications The black market for cannabis activity is thriving, and counterfeits are boosting sales for unlicensed retailers across the United States. Without regulation, corners are being cut, product safety is in question and health risks are becoming a reality. Additionally, the sophisticated production of knock offs show little signs of slowing down.

In this climate, the best way for cannabis brands to protect the integrity of their products, their brand reputations and the well-being of their customers, is to secure product trademarks, invest in difficult to replicate product packaging, and aggressively pursue counterfeits.

Some industry stakeholders believe knock offs will abate as consumers become more informed over time, and others are frustrated that counterfeits are stoking unlicensed dispensaries, who are taking such a large portion of market share. Either way, legitimate cannabis outfits are working hard to stay licensed, and to keep their businesses running. It seems the longer it takes to clamp down on counterfeits, the harder it will become for legal businesses to continue trading. Let’s hope the ramped up authority crack downs continue to make inroads and pave a smoother path for legal cannabis business owners moving forward. About Cannabis Law Group The Los Angeles CANNABIS LAW Group represents growers dispensaries, ancillary companies, patients and those facing criminal marijuana charges. Call us at 949-375-4734. Additional Resources: The Center for Disease Prevention and Control California Department of Public Health Bureau for Cannabis Control California

To start, the idea of tracking marijuana traveling throughout the supply chain sounds simple enough. In theory, all cannabis products would be given unique identification numbers, noting from which ‘batch’ or ‘lot’ they were born. Products would then be sent to labs for testing. Next, approved products would be passed from producer to distributor, and finally to retailers for sale. At each step, the state should be able to track each piece of marijuana as it moves through the chain, making sure nothing is being redirected out of state, and ensuring everybody is paying their required taxes.

But in practice, a few hiccups quickly come to light. First up, only businesses holding ‘provisional’ or ‘annual’ licenses are required to subscribe to the track-and-trace system. And until last month, there were more than 600 marijuana businesses operating on ‘temporary licenses,’ who would not have had to track-and-trace. This means, there was no way regulators could comprehensively account for every legal product moving about the state.

While those 600 temporary cannabis business licenses all expired at the end of July, and many of those cannabis business owners await approvals on provisional or annual license applications (another story in and of itself), Lori Ajax, State Bureau of Cannabis Control (BCC) chief, recently said it’s a priority of the bureau to get all temporary licenses transitioned onto either provisional or annual licenses, as quickly as possible, so those businesses won’t have to halt their operations.

It’s true that when the provisional or annual licenses are approved, those marijuana business owners are immediately required to begin tracking-and-tracing. And as the CCTT is quite complicated, many companies already required to track-and-trace are hiring full-time employees to traverse the system.

Tagging Products Has Proven a Challenge One common complaint from marijuana retailers holding provisional or annual licenses, is that they must apply unique identification tags to all products. And because until very recently, many holders of temporary licenses weren’t held to those same standards, products would reach stores without said tags, leaving retailers having to sticker and tag products, at their own extra labor costs.

But the problem doesn’t stop there. Now with 600 odd businesses in line waiting for the state to approve their new license applications, and often a need to continue earning a living in the meantime, many are generating lots of paperwork for companies adhering to CCTT requirements while trading with businesses not yet in the system.

On the use of CCTT throughout the marketplace, Josh Drayton, communications director for the California Cannabis Industry Association (CCIA) says it’s a patchwork at present. “We’re not seeing it work it’s way all the way through the supply chain, which ultimately means it’s kind of a broken system at the moment,” he said.

Software Compatibility Also a Hurdle Another shared grievance is that CCTT is not properly set up to work smoothly with a common point-of-sale software system used by retailers. CCTT also does not account for businesses like growers or manufacturers awaiting provisional or annual licenses, who may have missing data. As a result, some retailers using that software are forced to simply ‘create’ information in order to move through to the next step within the CCTT platform.

So Was Track-and-Trace Just a Sweetener? One of the promises California’s 2016 Proposition 64 made, was that the state would always be able to locate every piece of marijuana sold, all the way ‘from seed to sale.’ Creating a tracking system then, was always going to be necessary to meet this promise.

Helping to prevent cannabis flowing out onto the black market was another reason. But so far, activity on the illicit market has shown little signs of slowing. One analyst estimates the underground cannabis market in California totals $3.7 billion per year, which outdoes the legal market fourfold.

Some believe the track-and-trace system was only offered up as a way of getting legalized marijuana over the line.

The Burden of Compliance Others believe that requiring compliance with an inventory control system places a needless burden on legal cannabis businesses committed to operating within the law. Amid the many opinions on the matter, one thing is certain, a slow transition to the new system has brought with it a whole lot of new red tape. And manufacturers and vendors may just have to prepare for further hiccups and delays as the industry presses ahead.

Legal Implications Thus Far Thankfully, marijuana businesses still getting up to speed with CCTT have been afforded some leeway. The BCC seems to understand this is a process, and hasn’t made an example of anyone as yet. But there are no assurances from the authorities that this is in fact the case. Most affected by this issue are businesses either moving to, or waiting on their, provisional and annual licenses following the expiration of their initial temporary licenses, as well as any new cannabis business operators coming into the fold. As a result, all industry stakeholders will watch carefully to see just how effective the CCTT system can be as it becomes more widely embraced in the coming months.

Need Legal Help Tracking and Tracing For Your Marijuana Business? Our California marijuana 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 949-375-4734. Additional Resources: California’s Cannabis Track and Trace (CCTT) System Proposition 64

The catch though, the California Department of Food and Agriculture (CDFA) is yet to show its ability to approve those provisional or permanent licenses, at the same pace applications are being lodged.

The backlog on approvals may be due to the complexity of the licensing application process itself. Tellingly, by mid July 2019, only 2,053 provisional licenses and 230 permanent licenses had been granted. As it stands, when applying for prospective licenses, cannabis farmers are expected to demonstrate compliance with the stringent California Environmental Quality Act (CEQA), as well as submit:

• Background checks;
• Surety bonds;
• Real property documents;
• Detailed site plans;
• Farm management practices;
• Waste management protocols;
• Security procedures; and
• Pesticide measures.

Obviously once these detailed applications are submitted, someone then needs to review them, which is also a lengthy process. The lag time evident in securing updated license approvals is leaving 7,181 cannabis farmers with a dire choice – either cease operating until a new license is approved, or continue growing and selling, and risk fines as high as $30,000 a day for trading without a license. For many growers, who are low on resources, this is a perilous predicament.

As the cannabis industry continues to grow in California, on July 1 Governor Newsom signed Assembly Bill 97 into law. Essentially, AB 97 helps make way for additional provisional licenses and removes a previous barrier, requiring a cannabis farmer to first hold a temporary license before applying for a provisional license. AB 97 not only opens the doors for a new wave of marijuana growers to join the legal cannabis landscape, but a second function of AB 97 also enables the renewal of provisional licenses for growers who have already obtained these. This particular change gives cannabis farmers more time and some leeway to meet the stringent compliance requirements of the CEQA, before securing a permanent annual license.

But AB 97 does not help temporary license holders. Under the current law, temporary licenses cannot be renewed or extended. To assist farmers with expired temporary licenses who are still waiting for their prospective or permanent licenses, Senator Mike McGuire sponsored Senate Bill 67. It sought to extend and reinstate a grower’s temporary license until September 15, 2019, to help farmers continue operating legally, while waiting for the CDFA to grant their subsequent license approvals. In order to benefit from SB 67, growers must have obtained their temporary licenses and applied for a provisional or permanent license prior to the expiration of their temporary license.

Unfortunately for those 7,181 temporary cannabis license holders now needing new licenses, SB 67 has stalled and shows little signs of progressing any further. Legislators appear to believe AB 97 adequately addresses the majority of cannabis business license issues, meaning farmers yet to receive their updated license approvals, must merely wait it out, no matter how long that takes.

Legal Implications Thus Far State lawmakers are yet to offer any assurances of leeway for marijuana farmers now waiting on the CDFA to approval their provisional or permanent cannabis business license applications. Many will watch with interest to see whether examples are made by law enforcement in this area, amid city sanctioned crack downs and blitzes now in effect that target blatant black market cannabis business operations.

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 949-375-4734. Additional Resources: California Department of Food and Agriculture Assembly Bill 97 Senate Bill 67

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.

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 949-375-4734. Additional Resources: Proposition 64 California Bureau of Cannabis Control California Cannabis Industry Association

CBD is naturally found in cannabis plants, and is widely known for its relaxing properties. But CBD won’t produce a ‘high,’ as it lacks the psychoactive tetrohydrocanabidiol (THC), found in marijuana. CBD-derived products have quickly grown in popularity, thanks largely to a wide range of potential health benefits, including relieving pain, anxiety, seizures and brain injuries.

According to Michael Lux, partner at Crowe accounting firm, the next 6-12 months will involve strategic minority investments in the CBD space. He noted too that while the majority of CBD companies are of interest to investors, they are still less than five years old, so they’d likely need a little more time before preparing to engage in full exit strategies.

US Farm Bill Opened the Gates Over the last eight months, a slew of beauty, personal care, and pet brand products have quickly become available across a variety of retail stores. In part thanks to the US Farm Bill, which was passed in December last year. This bill essentially relaxed restrictions, allowing licensed cannabis growers to produce hemp on an industrial scale, without fear of prosecution. It also relaxed restrictions around selling hemp-derived products interstate. The passing of the US Farm Bill was a tipping point, enabling CBD-derived products to go mainstream.

A recent Forbes report even projected the combined U.S. CBD sales market would likely exceed $20 billion by 2024.

Too Early for Buyouts Meanwhile, one industry banker noted it will be some time before makers of CBD products start to see buyouts from traditional consumer packaged goods (CPG) companies, especially with regard to food and beverage products. Mostly because the Food and Drug Administration (FDA) is still working to outline its CBD regulatory framework, and that tweaking will likely be ongoing. Just last month the FDA announced it has prioritized efforts to establish clearer CBD guidelines, and plans to publish a report this fall.

Until then, companies selling personal care CBD products are particularly well poised to attract strategic investments. That’s because regulators are far more comfortable with non-ingestible products, which significantly minimizes an investor’s risk.

Regulators Pave the Way Once the FDA clarifies its regulations on CDB-derived products, we can expect strategic buyers to show interest in acquiring CBD brands across consumer, pharmaceutical, and food and beverage industries. In the meantime, there are five key regulatory concerns most investors are monitoring before investing in CBD businesses:

1. Drug Enforcement Administration regulation of CBD – marijuana is currently considered a Schedule 1 drug and is not approved for medical use in the U.S.; but hemp is defined as the plant, or any part of the plant containing a THC concentration of no more than 0.3 percent.
2. FDA regulation of CBD products – advertising or using CBD as a dietary supplement is currently prohibited.
3. Some state laws restrict CBD product sales – North Carolina, Maine and New York restrict CBD products, just to name a few, and could severely impact overall CBD product sales.
4. FDA limits advertising and label claims made on CBD products – the agency will diligently pursue companies making unsubstantiated marketing claims.
5. Regulation of CBD products will continue to evolve – a specific internal agency working group will continue to explore options for dietary supplements containing CBD to be marketed lawfully.

Legal Implications Thus Far While CBD businesses continue to blossom, investors will become increasingly active in the growing CBD sector. Investors, like so many other industry stakeholders will watch closely on how ongoing regulations will impact the marketplace. It is clear that no matter how the industry progresses, regulators and legislators will play a large role in defining just how products are developed, where they can be sold, and what can be touted in advertising and marketing efforts.

Need Legal Help Investing in or Acquiring a Commercial Cannabis Business? Our California Hemp & CBD attorneys 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 949-375-4734. Additional Resources: 2018 US Farm Bill FDA Guidelines

We could see this changing, especially because part because the California Supreme Court’s ruling in Ross v. Ragingwire Telecommunications (one of the most recent to address this issue) was predicated at least partially on the fact that the U.S. Supreme Court had affirmed challenges to the federal law in part because deemed marijuana dangerous Schedule I drug. Recently, the U.S. Attorney General said he’d favor a new bill protecting cannabis businesses and users from federal prosecution as long as they were in compliance with federal law. This measure has broad bipartisan support, as does another that would shield banks doing business with these companies from federal money laundering charges.

It’s not clear either measure would necessitate de-scheduling the drug, but doing so likely impact legal precedent in numerous areas of law – including employment and its zero tolerance. for drugs.

The History of Employer Zero Tolerance Policies

The policy gained its first real foothold in 1986, when then-President Ronald Reagan signed an executive order requiring all federal employees to refrain from any use of illegal drugs as a condition of employment. That included by on duty and off.

Two years after that, federal lawmakers passed the Drug-Free Workplace America Act, which allowed mandatory drug-testing of employees AND government contractors, citing safety concerns. This was with the exception of the postal service certain units of the legislative and judicial branches.

Those measures only applied to federal employees, but local and state decision-makers adopted similar programs under state laws and implemented zero-tolerance programs for drug-free workplaces.

As Los Angeles cannabis employment law attorneys know, there is nothing in the U.S. Constitution that bans this, and in subsequent case law, various limitations were imposed to ensure the government wasn’t acting in a manner that was discriminatory or in violation of a person’s constitutional rights to be protected against unlawful searches.

California Employers’ Shifting Stance on Worker Pot Use

Since the advent of legalized marijuana, positive drug tests rates of climbed. They rose 10 percent last year, to reach about 2.3 percent. Rates were higher in states where marijuana is legal.

Meanwhile, the state’s unemployment rate has grown to 4 percent, meaning companies have to stay competitive if they want the best worker. Establishing a provision that we recognize at this point to be arbitrary could exclude a wide range of qualified workers. It would be akin to testing new applicants on whether they consumed alcohol the previous week (which we can’t, because alcohol is processed through the body at a faster pace.

When billionaire CEOs are smoking marijuana on air for a laugh, it garners a bit less credence to the opposing side.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

National Treasury Employees Union v. U.S. Customs Service, 1989, U.S. Supreme Court

More Blog Entries:

50k Los Angeles Marijuana Convictions to be Dismissed, Reduced, April 1, 2019, Los Angeles California Cannabis Lawyer Blog

Los Angeles CBD lawyers can explain that overlapping federal and state laws have created substantial confusion among restauranteers about what’s legal and what’s not. Consulting with an attorney before launching your latest line of CBD products is advisable.

California and Federal Laws on CBD in Food and Drink Products

CBD was removed from the list of Schedule I narcotics by the U.S. Drug Enforcement Administration just prior to the passage of the 2018 Farm Bill, which thereafter removed the drug from the list of scheduled drugs entirely. Still, it’s the position of the U.S. Food & Drug Administration that CBD-laced food products sold into the food supply are illegal, per the federal Food, Drug & Cosmetic Act, the original version of which was passed in 1938. That law makes it illegal to sell a prohibited active ingredient in foods or supplements slated for sale across state lines.

However, the FDA has approved a CBD-laced seizure medication called Epidiolox to be treated for a rare form of seizures. The outgoing FDA commissioner told Congressional leaders last month that the agency may consider allowing the use of CBD compound in some foods if it was diluted. That’s not expected to open the doors overnight. An FDA public hearing on cannabis compounds – including CBD – is slated for May. It’s meant to be an informational conquest, but is unlikely to result in any final decisions pertaining to the law.

More recently, Los Angeles CBD lawyers were made aware that the California legislature amended AB 228, the state’s position on CBD in food, beverage and cosmetic markets. This didn’t entirely green-light CBD for use in food products, but the amendments might eventually open the doors to the manufacture of such products, if they contain hemp-derived CBD (as opposed to cannabis-derived CBD) and are licensed within the cannabis chain.

Lawmakers in several states and cities are carving out their own rules. In Colorado, for instance, lawmakers last year expressly allowed any part of a hemp plant to be used for infusion in foods for sale. California, Maine and New York City, however, back the FDA stance that CBD is not to be sold as an additive in food. The majority of states, however, refuse to allow any CBD to the general public. Others only allow it to be distributed with a doctor’s prescription.

California’s Recent CBD Amendment

The initial text of AB-228 would have indicated food, drinks and cosmetics wouldn’t be considered “adulterated” with the inclusion of hemp-derived CBD. The revised version of the bill would indicate this but also that foods and drinks containing CBD hemp are safe for consumption by both humans and animals.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:’

AB-228 Food, beverage, and cosmetic adulterants: industrial hemp products, March 21, 2019, California Legislative Information

More Blog Entries:

Los Angeles, West Hollywood, Weigh Allowing Pot Smoking in Public, March 12, 2019, Los Angeles CBD Business Lawyer Blog

NBC-4 Los Angeles reports the men, ages 37 to 44, all of Pasadena, were each charged in an L.A. federal court with one count of manufacturing, distributing and possessing marijuana with intent to distribute. As our L.A. marijuana criminal defense lawyers can explain, depending on the amount of marijuana purportedly involved, this could result in a maximum prison term of anywhere from 5 years to life, per 21 U.S.C. § 841.

Investigators allege the men were wired millions of dollars from China in order to buy homes that would be used in illegal cannabis grow operations. During one of the search warrants executed, authorities reportedly seized some $80,000 in cash plus 1,650 marijuana plants. Federal authorities took possession of at least seven houses, with an estimated cumulative value of $5 million, per the U.S. Attorney’s Office.

Licensed Real Estate Agent Orchestrated Scheme to Conceal ID of True Home Owners

In affidavits and arrest records filed in court, federal prosecutors assert that one of the three men in question was a licensed real estate agent who initiated purchase of these properties with straw buyers. The purpose was to hide the true identity of the individuals who were buying the homes. The marijuana harvested from the plants grown at these covert cultivation sites was processed and then sold on the black market to buyers in both California and Nevada.

Reports are that after the money was received from China (the place to which wire transfers for down payments on the homes were traced), the realtor bought seven houses, converted them into grow houses and paid the utilities and taxes. He also allegedly set up the shell companies that for the express purpose of managing the finances for these properties. The realtor reportedly attempted to create distance between himself and the operations by having the two other men handle the day-to-day care-taking of the marijuana grow houses. Those two also assisted with out-of-state distribution of the drug, as well as return of the financial proceeds to the principle organizer.

Investigators say the realtor also reportedly tried to divert electricity directly from nearby power lines, in turn stealing from the utility companies, in an effort to conceal the high power usage the marijuana grow houses consumed. This also, authorities said, created a high risk of fire hazard that endangered neighbors nearby. (This is precisely what The Los Angeles Times reported happening at a house in Hesperia in January; an allegedly illegal cannabis grow house had a wiring circuit failure that sparked a house fire, leading to the discovery of more than 1,000 marijuana plants. The owner of the home did not have a license to grow marijuana in California.)

Feds Cracking Down on Illegal Grow Houses in L.A.

Los Angeles marijuana criminal defense lawyers need to stress that while the drug has been decriminalized, that does not mean you can’t be charged with a crime – particularly trafficking – if you aren’t abiding by state laws. The drug is still illegal per the Controlled Substances Act, and while federal prosecutors have laid off those operators who are following the letter and spirit of state law, companies or individuals who are not may face the full ire of federal authorities. The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: Men Arrested for Purchasing Homes Converted Into Illegal Marijuana Grow Houses, March 7, 2019, City News Service More Blog Entries: Report: Most California Cities Bar Cannabis Cultivation, Sale (And How We Can Help), Feb. 28, 2019, California Marijuana Business Lawyer Blog