In Richmond Compassionate Care Collective v. 7 Stars Holistic Foundation, an independently-owned dispensary, RCCC, in Contra Costa County, sued the owners of the Richmond Patients’ Group (RPG) over allegations of conspiring to block RCCC from opening a new shop. Evidence presented at trial included evidence the defendant impeded access to the finite amount of commercial property zoned for medical marijuana distribution.

Plaintiffs argued the defendant, a potential competitor, intentionally thwarted their opportunities by submitting fraudulent letters of intent, leases, and purchase agreements to landlords of commercial properties, effectively tying up those spaces until RCCC’s permits became expired. (Local ordinance in Richmond, Calif. requires cannabis shop permit holders open up a shop within six months or lose their permit.) The defendants reportedly even went door-to-door, trying to persuade landlords to avoid leasing to RCCC. Defendants also made efforts to compel a change in city ordinance that would reduce the number of cannabis permits available (in this, they were successful). RPG was also accused of trying to influence city officials to deny RCCC’s licensing permit.

As our Los Angeles cannabis attorneys can explain, trying to compel a change in local ordinance or state law isn’t illegal. But the plaintiffs underscored it as evidence of the defendant’s purpose and intention with regard to the other actions.

RCCC alleged RPG’s efforts ensured they were closed off at every turn by RPG’s actions and eventually lost their permit – and millions of dollars in investments and potential profits. This, they allege, was in direct affront to the California Cartwright Act, the state’s antitrust law prohibiting efforts to block fair competition in the free market.

Why California Cannabis Company Antitrust Cases May be On the Rise

Antitrust cases are intended to ensure free and fair markets in our economy. Congress passed the first antitrust law in 1890, the Sherman Act. Two additional federal antitrust laws were passed in the years after, including the Federal Trade Commission Act, which established the FTC, and the Clayton Act. Although there have been some revisions over the years, these laws are still in effect today and remain the core of U.S. antitrust law.

The laws exist to prevent things like unfair competition, unlawful mergers, and illegal business practices that would deprive consumers and workers of the benefits of free market trade and opportunities. Ultimately, the idea is to ensure there are strong incentives for companies to operate efficiently, keep prices down, keep quality up, and play fairly.

The California Cartwright Act builds upon these principles, with specific prohibitions on things like market division schemes, exclusive dealings, price fixing, price discrimination, and group boycotting.

We’ll start seeing more antitrust cases in the California cannabis industry because the competition is getting increasingly fierce, particularly in regions where potential profit margins are high but permits and opportunities are limited. Cannabis as an industry is highly-regulated and inherently regional, which means it’s going to be inevitable that some firms are going to get squeezed. Whether that amounts to antitrust violations will depend on the specifics of the case.

If you believe your competitors have engaged in unlawful business practices or if your cannabis company has been accused of unfair practices, it’s important to consult with an experienced Los Angeles cannabis business lawyer as soon as possible.

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 Jury Awards Millions To Cannabis Company In Antitrust Case – Anti-trust/Competition Law, Oct. 6, 2021, 6Park News

Criminal prosecutors for the U.S. attorney ordered records from 30 cannabis companies, including Ghost Management Group LLC, owner of the subsidiary Weedmaps. Through its website, Weedmaps not only provides consumers with lists of nearby cannabis retailers, it also allows consumers to find retail deals, place delivery orders, and rate compare and cannabis stores.

Among the points of interest within the subpoena, the prosecution demands documents surrounding marijuana businesses noted on Weedmaps, as well as records documenting the website’s online ordering service. Additional records sought by the government pertain to other pieces of information kept by Weedmaps, including notes on its staff, accounting practices and business investors. More specifically, the demands extend to communication with, and payments made to federal, state and local employees, elected officials, and any candidates for those offices.

While intentions behind the initial investigation remain unclear, our Orange County cannabis business lawyers believe the requests outlined within this subpoena signal early stages of a probe. An important component of the request appears to surround a set of records associated with services provided by Weedmaps that allow for internet generated marijuana purchases.

Terra Tech (now known as Onyx Group Holdings following a merger) and CannaCraft are among the companies for which the subpoena requests documents. CannaCraft is licensed for cannabis manufacturing, while Terra Tech holds a retail license through a subsidiary.

The prosecution’s call for documentation will likely seek to determine whether or not Weedmaps, and others, have adhered properly to the state of California’s stringent cannabis regulations. Under federal law, in order for the prosecution to successfully prosecute a company, it must show that a cannabis entity is non-compliant with California’s cannabis regulations.

While federal law still prohibits the possession and sale of marijuana, Congress has thus far cut off funding to the Justice Department, in a move to block the pursuing of such cases, so long as the companies or individuals in question are complying with their state’s medicinal marijuana regulations.

Shortly after Colorado legalized marijuana use, federal prosecutors swooped in and made an effort to pursue companies appearing to be in fundamental violation of the state’s cannabis regulations.

Implications Unlicensed cannabis businesses have troubled law-abiding businesses to no end. Either by milking licenses, then siphoning marijuana off into the illicit market, only to undercut legal storefront price points. A Californian U.S. attorney’s office investigation into Weedmaps and its business associations signals a possible change from the ‘hands-off’ approach the federal government has shown toward state marijuana regulations, thus far.

It also highlights the possible outcomes associated with taking a risk in conducting illegal business dealings, and sends a very clear message that unlicensed businesses can no longer expect to carry on unlawfully without fearing the consequences for those actions. 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 Marijuana Laws Overview (Medical Marijuana, Proposition 64, Cannabis Taxes, etc.)

The suits allege that Case Mandel and his Cannadips business operations, used fictional projections — inflated by as much as 2,000 percent — to deliberately mislead lenders into investing in his cannabis companies, then Mandel supposedly held the funds without ever intending to repay them.

Lawsuits, Lawsuits, Lawsuits Of the three lawsuits, the first was filed in the district court of Clark County, Nevada. While the second was filed in Humboldt County, California, against Mandel, Trinidad Consulting, and Trinidad Management, LLC, which has been trading as Cannadips. Then a federal lawsuit was filed in the U.S. District Court for Nevada this month, and names the same targets as those listed in the California suit.

Throughout the lawsuits, Mandel is presented as the alleged mastermind behind a dishonest ploy to attract investments and loans via deliberately misleading tactics and documentation.

When our Los Angeles marijuana business attorneys reviewed the federal lawsuit, they quickly saw it mirrored the suits already filed in California and Nevada state courts. All three gave detail on the extent someone seemingly above board appears to have gone, in order to manipulate investors, partners and lenders for personal financial gain.

The State Lawsuit The lawsuit presented in state court alleges Mandel was desperate to raise money, and he began his fraudulent activity in July 2018. Initially, Mandel borrowed $500,000, then another $500,000 in 2019. Next, when claiming more money was needed for marketing to attract sufficient funding to repay the large loan, Mandel borrowed a further $200,000, bringing the grand total to $1.2 million. Of which, the lawsuit alleges none has been paid back as yet.

Federal Legal Action The federal legal action is consistent in that it centers around Case Mandel, a well-known cannabis entrepreneur in the marijuana industry, and various businesses operated by Mandel under the trading name, Cannadips. The charges accuse Mandel of obtaining $1.2 million from investors by way of fraud, unjust enrichment, breach of contract and blatant misrepresentation.

Plaintiffs — Aether Gardens and Solace Holdings LLLP, together with Telloni Holdings Limited, established in the British Virgin Islands and now located in London — claim they were tricked with business numbers inflated by some 2000 percent, to loan Mandel $1.2 million to fund a cannabidiol (CBD) business.

The federal complaint notes a series of blatant misrepresentations made by Mandel, including the deployment of make-believe projections, intended to lure Solace and affiliates to enter deals that Mandel had no intention of fulfilling.

Implications Amid California’s budding cannabis industry, suits of this kind reveal a darker side to quickly changing industries. Claims of fraud, deception and misrepresentation serve as reminders to business people of all sorts, and point to the importance of doing one’s own due diligence, digging a little deeper into numbers, double checking with impartial sources and really getting a good sense check on the state of affairs before entering into investment deals of any kind.

Sadly, that just makes securing capital from investors and lenders that much more difficult for the many honest, hardworking and law abiding businesses operating within the cannabis industry. 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: Solace Holdings LLLC vs. Case Mandel (Clark County, Nevada) Telloni Holdings Limited vs. Case Mandel (Humboldt County, California) Solace Holdings LLLC, Aether Gardens vs. Case Mandel (U.S. District Court for Nevada)

This came as a surprise to some. Barry Brand had a reputation among county officials and industry investors as an honest businessman.

He was so well trusted by officials, that when a licensed cultivator property tour was given by the county to show reporters just how well cannabis regulations were going, Brand’s farm was chosen. Ironically, the tour intended, among other things, to demonstrate just how impossible it would be for a grower to siphon off crop to sell on the illicit market.

At Carpinteria’s Arroyo Verde, greenhouses spanning some 300,000 square feet are home to the sprawling rows of marijuana grown by Brand. After a county sheriff uncovered something that seemed amiss with this otherwise upstanding outfit, a search warrant was served. During the January 22 search of the farm, an extraction lab, a stash of cannabis oil concentrate weighing in excess of 100 gallons, and “off-book” sales evidence were discovered. All pointing to illegal business activity.

No Surprise for Locals Lionel Neff, who has been critical of the sudden rise in the area’s cannabis cultivation of late, said “no one was surprised” when Arroyo Verde farm was raided. Brand is one of a number of local cannabis growers blamed for injecting a stench into Carpinteria’s usually clean, fresh air.

“If they were good operators, they would have taken the community into account from the beginning.”

It seems Brand’s activity in the community may also have helped his business dealings. Since 2018, votes from county supervisors have allowed cannabis cultivators to grow crop with little if any vetting, in unlimited number and size. This ruling has seen the county’s identity quickly change, from one known for its scenic coastline and wine-tasting, to that of the Golden State’s new and unlikely hot spot for marijuana growing.

Together with other prominent growers in the area, Brand has been very involved in shaping cannabis policies, making political campaign donations, and hiring attorneys, lobbyists and communications agencies.

Resistance from Residents Clashes with residents from Santa Maria to the south coast arose, when an unregulated rush on planting in the area took hold. Local school children and neighbors from the seaside town complained to county officials of the plant’s smell filling the air. Others did contend the local economy would benefit a great deal from the newly generated tax revenue, but to date, much of those anticipated tax dollars are yet to eventuate.

An Investigation Ongoing The investigation of Brand continues. Initially, the sheriff’s office searched four parcels belonging to Brand under suspicion he was “growing and processing marijuana outside of the licensed parcel as well as possessing and selling cannabis crude (oil) without a license,” according to sheriff spokeswoman, Raquel Zick.

During the raid, detectives also found “off-book (black market) marijuana sales associated with the farm,” cannabis that was illegally stored and weighed approximately 20 pounds, a small and delicate extraction lab, and “1000 pounds of cannabis crude.” It’s estimated that quantity of cannabis crude would garner a street value anywhere between $1.1 and $1.6 million if sold on California’s regulated market, but industry insiders say it could fetch much more if sold interstate.

Our Orange County marijuana business lawyers assume that when Brand gave 100 members of the community a tour of his farm just prior to the sheriff’s office issuing the search warrant, he probably didn’t show them a delicate extraction lab on his property, which could potentially have exploded if not used with the utmost precision.

Implications Evidence found during the raid of Arroyo Verde farm demonstrates just how little county officials may actually know about the cannabis business operations they approve to receive state cannabis licensing. Given that county officials have looked only sparingly into the business dealings of farmers who are politically connected thus far, this investigation (albeit, ongoing) shows us it would be wise to look more closely in future.

Separately, any board voting to allow cannabis cultivators to have-at-it with minimal oversight, in a climate where illicit market activity is rife, also poses a potential red flag. A fine example of why an industry as young as California’s marijuana industry, needs checks and balances set in place and upheld, both for the good of the industry, and to keep business owners honest.

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: Carpinteria School Board Takes Marijuana Money – Los Angeles Times (Nov. 10, 2019)

As many industry insiders have echoed, anyone turning a profit in this new era, has to have at least one hand in unregulated dealings. Chris Coulombre, CEO of Pacific Expeditors in Sonoma, has said “I have to imagine that 60 percent of the market overall is probably playing in a parallel markets, but I don’t think they enjoy that. It’s truly a decision of necessity.”

Whispers of retailers selling counterfeit products are rife. Cultivators are known to sell unregulated product on the side. But how can we blame them? Suffering terribly at the hands of price undercutting from illegal competitors, these unregulated exchanges are all taking place in hopes of keeping doors open, and businesses afloat.

The Situation Overview

• State regulators and Californian law enforcement officers are yet to curb the state’s extensive black market activity;
• So much illicit activity exists that authorities simply cannot investigate it all;
• Illegal growers in sizable numbers continue to operate throughout the state; and
• More cannabis is produced than consumed in California, leading growers often to supply and export their surplus crop to illegal interstate markets.

An Industry Fragmented Our Los Angeles cannabis business attorneys know, one of the big problems plaguing the legal California cannabis industry and its growth, is that it arguably cannot get out of its own way. Given the size of the state and the diverse ideas within it, it is very hard to achieve any kind of political unification. And that is a sticking point, because for changes to be made, you need lawmaker support.

As an example, not all industry insider votes supported Proposition 64, and the numerous Californian trade organizations often share differing speaking points for regulators and elected officials. It’s that kind of fragmentation that is hurting. Without unification, how can the industry centralize funds for lobbying activities, legal proposals or ballot measures, let alone make any political progress?

“The divisiveness among the industry is a really difficult component and one that (the California Cannabis Industry Association) is absolutely committed to working on in 2020,” said Lindsay Robinson, CCIA executive director, back in January.

Implications Current conditions show us that incentive exists for illicit growers to obtain licenses. And the number of retailers operating legally in California is so small, they could never move all of the state’s cannabis crop alone. So, it should come as no surprise there is no way of telling when the legal market will exceed the illegal one.

Looking forward, we can expect to see a number of cannabis businesses continuing to keep one foot in each market, while the state works to help legal businesses lower their product prices. Only then will consumers be more attracted to the legal market, which will then help licensed businesses better compete with their illegal counterparts.

To address the fragmentation within the industry, stakeholders must align on their joint political goals, otherwise it will be a very long time before we see any serious systematic changes made.

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 – The Control, Regulate and Tax of Adult Use Marijuana Act

A number of Californian municipalities are yet to meet the ideal cannabis social equity standings, largely due to cannabis businesses tussling with numerous other issues, like licensing hurdles, tax hikes and the continued strength of the illegal market.

That said, of late, a pressing for increased social equity within the state’s capital has emerged. A finite focus has been set on providing both business guidance and financial support for minority communities, as well as those disadvantaged by the war on drugs.

Equity applicants take note — the state’s capital aims to grant as many as 10 of its next dispensary licenses to applicants who meet the equity criteria.

If you need help preparing an equity dispensary license application, our Los Angeles marijuana business lawyers can help.

The precise number of licenses to be awarded is yet to be determined, and the Sacramento City Council will vote on the matter as early as March.

The CORE Commitment Officials in Sacramento are using the CORE program, established in August 2018, upon which to base their commitment to social equity licensing. The Cannabis Opportunity and Reinvestment and Equity Program provides guidance and funding to individuals who meet the social equity criteria, namely those with a prior drug-related arrest,, or living in a low-income community.

While none of the 30 businesses currently holding Sacramento dispensary licenses are run by minorities, Malaki Seku Amen, lead designer of the CORE program, said the city’s goal is to eventually grant half of all it’s licenses to social equity applicants.

Seku Amen is also the president and CEO of the Sacramento-based California Urban Partnership, which aims to build economic security within communities of color.

“It is our expectation that social equity applicants will be the exclusive owners of these next new licenses,’ Seku Amen said.

And making the distinction of “exclusive owners” is an important one. That’s because other cities have been shown to have granted social equity licenses in cases where non-minorities played dominant roles.

To safeguard against this, Brenda Davis, director of the CORE program at the Greater Sacramento League, which assists in the running of the program, explained recipients of the next 10 licenses must be graduates of the CORE program.

Amen also noted that prior to the CORE program’s launch, a focus on social equity was virtually non-existent.

“We will be satisfied when equity is real,” he said.

From Illegal to Licensed Businesses The main goal of social equity across the board is to add businesses that otherwise may only have existed on the illicit market, into the legal fold.

As an example, of the estimated 100 illegal delivery services and shop fronts in Fresno, California’s fifth-largest city, more than half are run by minorities.

Legal Implications Inviting those already familiar with the cannabis industry to join the regulated market makes much more sense than establishing a new industry for outsiders, and then having to regulate that.

Beyond the logical case, providing legal avenues for existing business owners is a win because not only does it build wealth for individuals, it also builds financial security for families, and uplifts entire communities.

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 Urban Partnership Cannabis Opportunity and Reinvestment and Equity Program

Gov. Gavin Newsom has shown his support for the bill, as he now takes aim at updating California’s cannabis regulations.

Assembly Bill 1948, introduced by Assembly Members Rob Bonta, Ken Cooley, Reggie Jones-Sawyer, Tom Lackey, and co-authored by Assembly Member Mark Stone, seeks for three years to:

1. lower marijuana retail sales state tax from 15 percent to 11 percent; and
2. eliminate the cultivation tax altogether.

According to the state’s recent budget summary, these updates are intended to “simplify the system and to support a stronger, safer legal cannabis market.”

If you need legal assistance for your cannabis business, our Los Angeles marijuana lawyers can help.

What Took so Long? Over the last two years, similar proposed legislation updates have been pushed aside, with Gov. Newsom believing it too early to make legislative changes right after establishing legalized cannabis use.

Governor Now Ready to Update Laws The governor more recently, however, has hinted at now being more open to such an update. His new spending plan for the state not only includes a shuffle of agencies regulating the sale of marijuana, but also a streamlined approach for tax collection.

As it stands, the Department of Food and Agriculture currently licenses and regulates marijuana farms, while the state Bureau of Cannabis Control issues licenses and enforces the rules relating to retailers, distributors and delivery firms. Separately again, the state Department of Public Health oversees all marijuana manufacturers, including those who yield edible cannabis products.

Additionally, Gov. Newsom has also displayed a willingness to consider further measures intended to help strengthen the legal cannabis marketplace.

Pot Industry’s Stunted Growth Some industry insiders predicted that Proposition 64 would see a legal cannabis market in California generate $1 billion in state tax revenue each year. But last week’s budget estimate shared by the governor showed just $479 million is expected this fiscal year, followed by $550 million in the 2020-2021 budget year.

Contrary to expectations, the legal marijuana market has not grown as quickly as anticipated. Its slow growth is routinely attributed to high taxes, excessive bureaucracy, and market limitations resulting from three of out four Californian cities banning marijuana stores within their city limits.

Josh Drayton from the California Cannabis Industry Association (CCIA) has said changes like these proposed, are critical to the regulated marijuana industry’s survival. Furthermore, they’re necessary for licensed business operations to stand a chance at competing with the thriving illegal market, which “evades the financial obligations which drive up the cost of tested and regulated products.”

So when lawmakers re-introduce a bill of this nature, it demonstrates they understand the challenges legal cannabis business owners face, and the dire need for legislative assistance. The proposed bill seeks not only to simplify tax collection, but also to ease licensing and ultimately broaden access to the regulated marketplace.

Legal Implications These proposed tax cuts are vital to the survival of California’s legal cannabis industry. Measures such as these must be activated to give licensed operators a chance of competing with the illicit market, which shows little sign of retreating.

Setting up an independent department to oversee the many moving parts making up California’s regulated cannabis industry, will certainly help improve current conditions. Not only unifying the necessary regulatory functions, but also establishing a central contact point for cannabis licensees and local governments.

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: Assembly Bill 1948 Proposition 64

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

California Department of Consumer Affairs investigators seized numerous ready-for-sale products from the facility, including Kushy Punch packaged gummies, as well as approximately 7,200 Kushy Vape packaged disposable vaporizers. These products are estimated to carry a combined $21 million street value.

If you need help with business licensing and permits for your cannabis business, our Southern California business marijuana attorneys are here for you.

Kushy Punch Denies Wrong-Doing In a written statement, a lawyer for Kushy Punch confirmed the manufacturing facility and products in question do belong to Kushy Punch, yet denied the company is releasing illegal products for sale.

Instead, the statement claimed the cartridges in question were all found in a box that was labeled for destruction. That’s because the products were no longer viable – their batteries had ceased working while being held in storage for two years or more.

Anonymous Source Claims Kushy Punch Runs Two Separate Businesses An industry insider acquainted with Kushy Punch, claims the state-licensed outfit is running two facilities – one for licensed or above board products, and another specifically for the illicit market.

The source suspects that clean tested marijuana was funneled through the licensed Kushy Punch facility, then out into the legal supply chain. While the cannabis that may not have met with California’s rigid pesticide benchmarks was sent to the illegal kitchen, extraction lab and pen factory.

The informer also claims all of Kushy Punch’s black market operations are going to the Canoga Park facility, and that “they are using untested black market oil that is heavy in pesticide.”

The cannabis company’s legal statement further denies allegations of illegal activity. Instead it claims all Kushy Punch products endure extensive testing to be sure all products are safe, compliant and properly approved for sale.

Photos taken during the initial investigation show the Kushy Punch facility apparently performing petro-solvent extractions, where the THC (the active ingredient in cannabis) is concentrated by a technician. This practice is legal in California, so long as it’s done with a permit. But the extraction method can also concentrate pesticides within the cannabis, as well as the THC. Therein lies the obvious health danger.

Investigations are Ongoing Investigators found the San Fernando Valley facility appeared to be using extracts both in disposable vape pen cartridges as well as legitimate-looking THC food products. When raided, the facility was holding thousands of boxes of Kushy Punch packaged edibles, seemingly ready for sale and consumer consumption.

Bureau of Cannabis Control (BCC) spokesperson, Alex Traverso, said that while the investigation is still ongoing, the initial raid saw “investigators confiscate thousands of illegal cape carts worth millions of dollars.”

Legal Implications A number of cannabis manufacturing companies have existed both pre- and post-licensing eras. It should come as little surprise then that a lure exists for some companies to seek business operations on both legal and illegal sides of the isle. What will be interesting to see play out, is just what will happen if a big, above board player is found to be dabbling in both arenas. It is highly likely that should a licensed cannabis company engage in illegal business activity, that those licenses probably won’t be held for much longer.

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: Bureau of Cannabis Control

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

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

Washington, where requirements for marijuana businesses are strict, yet muddled. What started as a residency restriction meant to control big outside mega corporations from putting local businesses at a disadvantage has led to corporations researching ways to exploit residency loopholes and limiting who longtime residents can bring on as partners. Now, due to unclear definition of what qualifies a person for residency, some are concerned how to prove their status.

You see, according to RCW 69.50.331(1)(b), one must be a resident of the state for six months to apply for a marijuana business license. Not only that, all members of the business, no matter how small the stake, must meet the same residency requirement. Further, a “partnership, employee cooperative, association, nonprofit corporation, or corporation” must be formed in Washington according to state laws and meet the above outlined residency requirements in order to be issued a license. Lastly, licensees must comply with residency requirements throughout the duration of the license. Without a firm definition on what constitutes residency, though, some businesses have been in the lurch.In 2016, the Washington State Liquor and Cannabis Board eased up the chokehold on businesses a bit by allowing for non-bank financing to come from out-of-state, but these investors still could not hold a stake in the company, as outlined in the Cannabis Law & Policy Project. This adjustment in regulations by the board also included the amendment that increased the residency requirement for all interested parties of the business from three months to the current six months. Both moves were an attempt to discourage out-of-state investors from setting up makeshift residency in the state and encouraging them instead to be a more passive investor.

Good news for some Californians, there are no such residency restrictions at the state level. Many cities and local governments, however, have their own residency requirements in an effort to favor in-state and local businesses, according to a report from Marijuana Business Daily. Some have only allowed pre-established businesses access to limited licensing, trying to give grassroots businesses who have been working in medical marijuana a fighting chance now that recreational cannabis has hit the scene. Others have rules designed to give preference to owners who come from neighborhoods most negatively impacted by biased drug enforcement policies of the past. Others, still, will welcome entrepreneurs from anywhere, primarily seeking the influx of tax revenue from new businesses.

Similar to Washington, these regulations can often raise more questions than they answer. How long does one need to reside in a certain area to be considered a resident? How much time do they need to be on the premises for it to be considered their home? What about neighborhoods affected most by the War on Drugs? Can someone new move in and take advantage of these special opportunities? If questioned, what proof must you show? Does everyone in the business need to be a resident? Luckily you do not have to be a scholar on local laws to break down these answers. Our skilled Los Angeles cannabis business attorneys are well-versed in residency rules and the distinct set of guidelines you will face in each city and county. A free consultation is your first step to making sure your business is fully in compliance.

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

Additional Resources:

For Washington’s Pot Industry, Out-of-State Owners Could Supply a Lifeline — Or Invite Trouble, By Bob Young, Feb. 7. 2107, Seattle Times

More Blog Entries:

Strict Regulations Make Legal Marijuana Scarce in Washington, Oct. 11, 2014, Cannabis Law Group

Agriculture is working on a system of regulations for naming craft cannabis strains. According to a report from Ganjapreneur, this is similar to the way the system of naming works for wines, in which a wine must actually be from the Napa region in order to carry that moniker on its label. CalCannabis Cultivation Licensing, the arm of CDFA that controls marijuana growers, is planning workshops in September to gather feedback and provide more information to cultivators.

The area known as the Emerald Triangle in Northern California has earned its name due to its high rate of cannabis cultivation. In fact, it’s the largest marijuana-producing area in the country. Growers in the region would like to capitalize on their world-renowned status to help give their product recognition and increase its desirability. They pride themselves on creating interesting, high-quality strains and growing in top-notch environments, and they want to make sure that random grow operations from some other region can’t use their regional names on their own labels. As anyone in business knows, sometimes a remarkable product isn’t enough. When a market is saturated with a great deal of product that all appears to be the same, at least on the surface, branding becomes essential to help certain products stand out. Cannabis businesses are no different. This is especially true when you consider the average cannabis consumer is accustomed to just accepting whatever was available to them. In an era of recreational legalization, choices are far more plentiful, and it takes more to stand out among the crowd. Consumers need as much information as they can get about the type of cannabis they are purchasing, the strain, and what makes one product different than another. The right marketing can achieve just that.

Our cannabis business attorneys in Riverside are well-accustomed with the marketing considerations of marijuana businesses. We have experience guiding entrepreneurs and investors in how to best protect their market identity in a cutthroat business environment. Our legal team is well versed in trademark and copyright laws that will give you ownership over your unique brand and help customers distinguish you from the competition. Solid, distinctive branding helps customers establish recognition and trust for your product as they begin to connect your branding with quality experiences.

Many small farms and luxury manufacturers look to branding to help set them apart from mega-farms that have taken root in California, seeking to dominate the market. CDFA is taking a page out of the wine country playbook, looking to its regulatory agencies in how to create an “appellation of origin” system. CalCannabis has been tasked with establishing regulations for regional titles by Jan. 1, 2021. In the meantime, it is important to secure your branding copyrights and trademarks to protect your business immediately. Our skilled attorneys can help you with the necessary steps and considerations to protect your brand under the law. We also can help protect your company in the future from other businesses infringing on your protected branding or intentionally trying to cause customer confusion.

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

Additional Resources:

CDFA’s CalCannabis Appellations Program Survey, July 26, 2018, California Cannabis Portal

More Blog Entries:

Smaller Cannabis Business Operations Need More Support, March 9, 2018, Cannabis Law Group

world’s largest marijuana market. California Growers Association, based in Northern California, is merging with Southern California Coalition out of Los Angeles to leverage their combined strength when voicing needs of the cannabis industry to political representatives, according to Los Angeles Business Journal. A headquarters location for the far-flung group has not yet been selected.

Anyone who is familiar with the cannabis industry knows there are major cultural differences across the board — from the numerous farmers working the fertile lands of the “Emerald Triangle” in Northern California to posh dispensaries in L.A, and all of the laboratory testers, drivers, and processors in between. Each faction of the industry has different priorities, which has often kept the groups and their interests separate. Many in the state, however, are learning that more can be accomplished when we work together. The new CalGrowers-SoCal Coalition Collaboration is now 1,600 members strong, making the group a force to be reckoned with.There is a lot on the line, of course, for this group, composed of roughly 1,000 growers and about 600 manufacturers, lab workers, delivery drivers, distributors, retailers, and other marijuana industry workers. They are tasked with protecting an industry estimated to be worth $3.7 billion by the end of 2018 and $5.1 billion in 2019, with forecasts only growing from there. One hiccup anywhere along the chain can have vast ripple effects across all areas, making it essential for everyone in the industry to have each others’ backs. If a regulation is hitting distributors especially hard, it could have disastrous economic effects in all directions. All parts of the industry have to work in perfect harmony, so when a risk arises for businesses, consumers, or patients, it is beneficial to all involved that it be addressed quickly and efficiently.

Those who have stood in opposition of marijuana have learned that nothing is more effective than the power of numbers to spread your message. The more people are unified behind the same message, the more it gets repeated and the more traction it gets. That is how we found ourselves in the midst of the anti-marijuana “War on Drugs” that has devastated so many lives in this country. A single idea — “marijuana is dangerous” — gets repeated often enough, in school, by law enforcement, and in public service announcements, and people stop questioning how and why they came to that conclusion. Now, we need to use these same methods to spread the truth about this beneficial drug.

Our trusted cannabis business attorneys in Los Angeles know first-hand the power of working in teams. It is the spirit of teamwork and togetherness that we bring to each of our clients that we serve in the marijuana industry. Our collective knowledge and experience can be an asset to you and the broad network of cannabis businesses we have helped over the years. We are proud to provide consulting services, business plan strategies, and compliance advice to marijuana businesses in Southern California as another key to the long-term growth and success of the cannabis industry in the state.

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

Additional Resources:

Leading California Cannabis Industry Trade Associations Collaborate to Create Powerful Political Voice and Unify World’s Largest Cannabis Market, July 27, 2018, By Hezekiah Allen, California Growers Association

More Blog Entries:

Small Marijuana Farmers Take State Department to Court, Feb. 7, 2018, Cannabis Law Group

on a U.S. stock exchange by a marijuana producer. Ontario, Canada-based cannabis conglomerate Tilray went public on New York NASDAQ recently. The stock price spiked 30 percent in one day proving what we have been saying all along: cannabis is very, very good for business. According to a report from Quartz, investors rated the value of Tilray at time at $2.65 billion.

Tilray grows and processes cannabis to meet pharmaceutical standards. The company has really taken off in the wake of Canada voting to make marijuana legal nationwide, but the company’s products can be found in 10 countries, including a production facility in Portugal. Though located in Ontario, the company has its roots in a private equity firm in Seattle that has been investing in brands connected to the marijuana industry in hopes of positioning businesses to be on the forefront as prohibition is lifted worldwide. Canada is the second country to make adult use legal (Uruguay being the first). The U.S. has 30 states that have legalized at least medical marijuana, though they are still somewhat bound by the federal Controlled Substances Act, 21 U.S.C. Section 812. Many countries have partial allowances, such as the infamous cannabis cafes in the Netherlands. Despite the best efforts of backward thinking anti-marijuana propagandists, the writing is on the wall for cannabis legalization to continue to grow, and companies like Tilray are primed and ready.

Simply being in the cannabis industry is not enough to guarantee success, though. Other marijuana stocks and pharmaceutical stocks related to the marijuana industry have faltered or gone stagnant. Like anything related to business, it takes the right ingredients at the right time to appeal to investors. There’s also a very real fear for these marijuana companies who are paving the way that once the U.S. finally wakes up and makes marijuana legal nationwide, big name brands will jump into the market, sucking up investors on their name recognition alone.

These concerns are true not only of big-time players in the stock market, but also of the bold entrepreneurs who have faced adversity in order to bring cannabis products to the people of California and other states who have legalized this highly beneficial drug. It is exciting to be a business owner getting in on the ground floor of what is clearly going to be the next big thing. As we’ve already established, though, it takes the right ingredients at the right time. Our Los Angeles cannabis business attorneys have acted as consultants for numerous businesses, giving advice on compliance issues and how to best work in the parameters of local, state, and federal laws. A strong infrastructure is key to long-term success. If certain regulations are skipped or issues are ignored early on, they tend to snowball, causing bigger problems down the road. Establishing yourself as a business owner that can be trusted now will increase your chances of having a loyal customer base in tact as the industry continues to grow and evolve, and being in compliance now will make you more agile as more changes head your way.

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

Additional Resources:

Tilray IPO: Five Things to Know About the First Pot Company to Go Public on Nasdaq, July 18, 2018, By Max A. Cherney, Market Watch

More Blog Entries:

Investors Eye Marijuana Stocks, Jan. 23, 2017, Cannabis Law Group