Background – California Cannabis Regulation

Background – California Cannabis Regulation

Background – California Cannabis Regulation – this isn’t new content, in fact, the text has been refined and used several times. However, given the comments, we continue to read we believe having a clear and accurate summary of the history of cannabis regulation in California readily available is important.

California Proposition 215, also known as the Medical Use of Cannabis Initiative or the Compassionate Use Act, was Background - California Cannabis Regulationapproved by California voters as an initiative amendment to the California Constitution in the November 5, 1996, general election.

The passage of Proposition 215 in California was a watershed victory for medical cannabis. Proposition 215 exempts patients and defined caregivers who possess or cultivate cannabis for medical treatment recommended by a physician from criminal laws which otherwise prohibit possession or cultivation of cannabis.

In May 2009, the United States Supreme Court declined to hear an appeal of a California state appellate ruling from 2008 that upheld Proposition 215 and concluded that California can decide whether to eliminate its own criminal penalties for medical cannabis regardless of federal law. The appellate court decision came in a lawsuit against Proposition 215 filed by San Diego and San Bernardino counties.

Background – California Cannabis Regulation

These counties objected to Proposition 215 on the grounds that it requires the counties to condone drug use that is illegal under federal law. The two counties also challenged a law that requires counties to issue identification cards to medical cannabis patients so these patients can identify themselves to law enforcement officials as legally entitled to possess small amounts of cannabis. [ San Francisco Chronicle, “Solano to allow medical cannabis ID cards,” June 24, 2009]

Proposition 215 also led to the lawsuit, People v. Kelly.  The Kelly case was decided in January 2010 by the California Supreme Court.  In the Kelly case, the Court held the state of California cannot, through the legislative process, impose a state limit on medical cannabis that is more restrictive than what is allowed under Proposition 215. The Kelly case also limits the extent to which California’s initiative process is protected against legislative tampering.

The language that appeared on the ballot stated:

  • Exempts patients and defined caregivers who possess or cultivate cannabis for medical treatment recommended by a physician from criminal laws which otherwise prohibit possession or cultivation of cannabis.
  • Provides that physicians who recommend the use of cannabis for medical treatment shall not be punished or denied any right or privilege for making such a recommendation.
  • Declares that the measure is not be construed to supersede prohibitions of conduct endangering others or to condone the diversion of cannabis for non-medical purposes.
  • Contains severability clause.

In 2004, the California State Legislature passed the Medical Cannabis Program Act (MMPA). The MMPA was intended to clarify which specific practices with regard to medical cannabis were to be considered lawful in California. The MMPA:

  • Established a voluntary statewide identification card system;
  • Set limits on the amount of medical cannabis each cardholder could possess;
  • Laid out rules for the cultivation of medical cannabis by collectives and cooperatives.
Background – California Cannabis Regulation

In 2007, California’s Fourth Appellate District ruled against the City of Garden Grove, and in favor of a medical cannabis patient (Felix Kha), saying that “it is not the job of the local police to enforce the federal drug laws.” The case resulted from the seizure of medical cannabis from Kha by the Garden Grove police force in June 2005.

Kha was pulled over by the Garden Grove Police Department and cited for possession of cannabis even though Kha showed the officers proper documentation of his status as a medical cannabis patient.  The charge against Kha was subsequently dismissed.  The Orange County Superior Court issued an order directing the Garden Grove to 8 grams of medical cannabis to Kha that had been seized. The police, backed by the city of Garden Grove, refused to return Kha’s medicine and the city appealed the Superior Court decision.

In 2007 the Fourth District Appellate Court held the federal Controlled Substance Act of 1970, enacted to combat recreational drug abuse and trafficking, was not enacted to regulate the practice of medicine, “a task that falls within the traditional powers of the states.”

Before the Appellate Court issued its decision, the California Attorney General Jerry Brown filed a “friend of the court” brief on behalf of Kha’s right to possess his medicine. The justices noted in their opinion they were convinced by Brown’s arguments that local agencies are bound by state laws with regard to medical cannabis.

The California Supreme Court declined to review the case review in March 2008.  Garden Grove petitioned to the United States Supreme Court, which also declined to consider the case in late November 2008.  Medical cannabis advocates considered the decision a huge victory in clarifying law enforcement’s obligation to uphold state law – in this case, Proposition 215 which allows possession and consumption of medical cannabis. 

Background for State of California CDFA Authority to Regulate Cannabis

When a state legislature passes, and the governor approves, a law that creates a new program or changes the law governing an existing program, one or more state agencies must adopt new regulations, amend existing regulations, and/or repeal existing regulations in order to effectively administer the new or revised program.

The California legislature passed the Medical Cannabis Regulation and Safety Act [“MMRSA”][i] in 2015.  Governor Brown signed MMRSA on October 09, 2015, to become effective on January 01, 2016. MMRSA, which was composed of three legislative bills (AB 266, AB 243, and SB 643) established a licensing and regulatory framework for the cultivation, manufacture, transportation, storage, distribution, and sale of medical cannabis in the State of California.

MMRSA established the Medical Cannabis Cultivation Program within the California Department of Food and Agriculture to license cultivators, establish conditions under which indoor and outdoor cultivation may occur, establish a track and trace program for reporting the movement of medical cannabis through the distribution chain, and assist other state agencies in protecting the environment and public health.

The MMRSA tasked the following California Departments with establishing regulations for the medical cannabis industry:

  • Department of Food & Agriculture – Responsible for licensing cultivators and establishing a track and trace program through the Medical Cannabis Cultivation Program.
  • Department of Public Health – Responsible for licensing laboratories and manufacturers of cannabis products, such as edibles through the Office of Medical Cannabis Safety.
  • Department of Consumer Affairs – Responsible for licensing transporters, distributors, and dispensaries through the Bureau of Medical Marijuana Regulations.

California voters subsequently passed the Adult Use of Marijuana Act (Proposition 64) in 2016. Both MMRSA and Proposition 64 imposed responsibilities for oversight of commercial cannabis on multiple California administrative agencies.

The California Department of Food and Agriculture (CDFA) was granted the authority to

  • establish a cannabis cultivation licensing process for the state, and
  • develop a track-and-trace system to record the movement of cannabis and cannabis products through the state’s supply chain.

As a result, CDFA created a new division called CalCannabis Cultivation Licensing, which is tasked with overseeing these projects.

On June 27, 2017, California Governor Jerry Brown signed the cannabis trailer bill (also known as California Senate Bill 94). A trailer bill is a legislation that implements specific changes to the law to enact the state budget. Generally, a separate trailer bill is needed for each major area of budget appropriation, such as transportation, human services, education, revenue, or, in this case, cannabis. These bills typically are negotiated as part of the entire budget package each fiscal year.

In this instance, the cannabis trailer bill effectively merged the two existing cannabis bills—the Medical Cannabis Regulation and Safety Act and the Adult Use of Marijuana Act—into one streamlined bill: the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). The purpose of MAUCRSA was to create a unified and efficient regulatory process to govern both medicinal and adult-use (recreational) cannabis.

[i] Senate Bill 643 passed as part of MMRSA contained language which required through the Medical Marijuana Regulation and Safety Act, that the Department of Food and Agriculture administer the provisions of the act related to and associated with the cultivation and transportation of medical cannabis.

Background – California Cannabis Regulation

 

Author: abizcannabis

Managing Director & CEO of integrated transactional financial advisory, tax, and technology consulting firm - aBIZinaBOX Inc New York, Chicago, and OaklandCPA.CITP.CISM.CGEIT.CGMAExpertise with: Alt. Investments/Private Equity, Real Estate, Professional Services, CA Cannabis, Tech Start-Ups and Distressed Assets/DebtTechnology Certifications including:Advanced & High Complexity Cloud Integrator AICPA PCPS, CAQ,, IMTA, CITP ISACA CGEIT, CISMState CPA Societies in California, Florida, Illinois, New York and TexasExpertise with Regulatory Compliance - US - HIPAA, FINRA, SEC Rule 17(a)(3)/(4), eDiscovery, FINCEN - EU- EBA, ESMA, EIOPA UK - BoE, PRA, FCA