COOPERATIVES – CANNABIS
COOPERATIVES – CANNABIS – On August 11th we published an article entitled AWFUL ADVICE in which we criticized the Office of the California Attorney General for publishing misleading information relating to cannabis collectives and cooperatives. [ See Awful Advice ] We were kind in reference to the material published by the AG’s Office as “awful.” The material was wholly devoid of competent legal analysis with respect to cannabis collectives and cooperatives.
In fairness to the AG’s Office, the first three Parts of guidelines provide a significant amount of useful guidance for law enforcement. It is our impression the guidelines published by the AG’s Office were a long-term
project and Part IV was a last-minute addition. As we pointed out on August 11th, California would have been better served if Part IV was omitted.
The AG’s Office is not the sole agency with serious misconceptions relating to cannabis collectives and cooperatives. All of California’s cannabis regulatory agencies have committed serious errors in connection with cannabis collectives and cooperatives. In fact, the source of the erroneous information published by the AG’s Office appears to be the Bureau of Cannabis Control (“BCC”). The AG’s Office cites erroneous material published by BCC as the authority.
COOPERATIVES – CANNABIS
The mortal sin of the AG’s Office is the agency’s acceptance of the infantile analyses of BCC and CalCannabis of cannabis cooperatives and collectives. It is inexcusable for the agency that is tasked with providing quality legal advice for California to accept the analyses of other agencies that appear to have been made by untrained personnel rather than make its own analysis of the law.
That BCC and CalCannabis should so badly misconstrue the laws these agencies are tasked with administering is not surprising. It is, however, wholly unacceptable. It is obvious to all that California’s roll-out of cannabis regulation is a colossal fiasco. The reasons for this fiasco are also obvious – lack of careful analysis, lack of qualified legal advice, and a failure to exercise good judgment.
Enough about how we arrived at this circumstance. It is the circumstance that must be discussed. Those administrative agencies that are interested in cannabis collectives or cannabis cooperatives have expressed a variety of erroneous opinions. All are erroneous. All have elements of accuracy. There is a common thread. In every instance, the agencies expressed simplistic opinions because the agencies lacked an understanding of the complexities of the subject matter.
We cannot reconcile the conflicting opinions expressed by various agencies. The conflicts cannot be reconciled. We decided to write this article to suggest a grouping of cannabis collectives and cannabis cooperatives in order to facilitate the regulation and taxation of these entities in accordance with California law.
COOPERATIVES – CANNABIS
We must first state the parameters for our discussion of the suggested groupings of cannabis collectives and cooperatives. Cannabis collectives and cannabis cooperatives are a very small portion of the universe of collectives and cooperatives. The universe of collectives and cooperatives that are not cannabis collectives or cooperatives includes agricultural collectives, consumer cooperatives, banking cooperatives, governmental cooperatives, and insurance cooperatives. This article solely applies to California organizations. This article is relevant to any organized business activities that facilitate the movement of cannabis from cultivator to consumer.
The material published by the AG’s Office was entitled, “Guidelines for the Security and Non-Diversion of Cannabis Grown for Medical Use.” The title is a non sequitur. Cannabis is cannabis. California legalized the cultivation, possession and use of medical cannabis in 1996. Almost 20 years passed before California legalized adult-use cannabis. Medical cannabis has 20 years of history in California. An extensive body of law exists relating to California medical cannabis. No comparable body of law exists with respect to adult-use cannabis.
Proposition 64 preserved the rights granted Californians under Proposition 215. Too many experts on cannabis in California have forgotten that Proposition 215 was preserved in Proposition 64. Cannabis does not know whether it is medical cannabis or adult-use cannabis. Medical cannabis in the hands of a cultivator is identical to non-medical cannabis. Until the cannabis is placed in the stream of commerce, the cultivator may not have decided whether the product is medical cannabis or adult-use cannabis.
While cannabis is cannabis, a collective is not a cooperative. A cooperative is a legally recognized entity created pursuant to statutory law. California law authorizes the organization of a number of types of cooperatives. A collective is an organization recognized under common law. A medical cannabis collective can exist as a legally recognized organization under California law. An adult-use cannabis collective cannot be recognized as a legally existing organization under California law.
COOPERATIVES – CANNABIS
We addressed the distinction between collectives and cooperatives because California’s cannabis regulatory agencies, including the AG’s Office, have thoughtlessly failed to do so. We are writing to suggest that the AG’s Office, as well as the various cannabis regulatory agencies, consider there is a minimum of five different groupings of cannabis collectives and cooperatives that must be identified in connection with California’s regulation and taxation of commercial cannabis activity.
The groupings we suggest the various cannabis regulatory agencies consider are:
“Licensed entities organized pursuant to provisions of California law other than Business and Professions Code (“B&P”), Title 10, Chapter 22, including General Stock Corporations, Limited Liability Companies, Nonprofit Mutual Benefit Corporations, Nonprofit Public Benefit Corporations, Agricultural Cooperatives and Consumer Cooperatives, which are engaged in commercial cannabis activity as medical cannabis cooperatives or as adult-use cannabis cooperatives;
Licensed medical cooperatives organized pursuant to B&P, Title 10, Chapter 22;
Licensed adult-use cooperatives organized pursuant to B&P, Title 10, Chapter 22;
Licensed medical cannabis collectives and cooperatives, not organized pursuant to B&P, Title 10, Chapter 22, operating in compliance with Proposition 215; and
Unlicensed medical cannabis collectives and cooperatives operating in compliance with Proposition 215.”
As is noted above, all of the groupings of organizations identified above must be licensed pursuant to the Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) except for medical cannabis collectives and cooperatives operating in compliance with Proposition 215. The entities within each of the first four groupings of entities have sufficiently different bundles of rights, powers, and privileges for the purposes of engaging in commercial cannabis activity that the various regulatory agencies must be able to distinguish between them.
We have suggested the five groupings identified above are a minimum. A number of arguments can be made that the myriad of different organizations we have included within the first grouping will be impossible to regulate and tax in the absence of some subdivisions of this grouping. For example, we can think of a number of reasons regulatory agencies might want to distinguish between General Stock Corporations operating as cooperatives and Nonprofit Mutual Benefit Corporations operating as cooperatives. Similarly, a forceful argument can be made that Limited Liability Companies operating as cooperatives must be distinguished from Corporations operating as cooperatives.
COOPERATIVES – CANNABIS
The difference between medical cooperatives organized pursuant to B&P, Title 10, Chapter 22, and adult-use cooperatives organized pursuant to B&P, Title 10, Chapter 22, is significant solely for the purposes the California Department of Tax and Fee Administration (“CDTFA”). For the purposes of the other cannabis regulatory agencies, there appears to be no regulatory reason for distinguishing between medical cooperatives and adult-use cooperatives organized pursuant to B&P, Title 10, Chapter 22, as long as CDTFA can separately distinguish between the two groups of organizations.
An argument can be made that it was not necessary to identify medical cannabis collectives and cooperatives operating in compliance with Proposition 215 as a grouping of entities. No cannabis regulatory agency has jurisdiction to regulate such organizations. It is solely when such an organization fails to operate in complete compliance with Proposition 215 that such an organization runs afoul of California’s regulatory scheme for cannabis.
The lack of competence with which California’s cannabis regulatory agencies have addressed collectives and cooperatives is a symptom of a disease. It is not the disease. The disease is the failure on the part of California regulatory agencies to carefully analyze their respective regulatory tasks, to secure quality legal advice, and to exercise good judgment. Proposition 64 was ill-conceived and poorly written. California’s cannabis regulatory agencies have made the administration of California’s regulation and taxation of its cannabis industry more difficult and costly through administrative ineptitude.
COOPERATIVES – CANNABIS
by smoking, vaporizing, within the food, or as an extract. Under Sharia law, marijuana is categorized under narcotics or “Mukhaddirāt.” In Arabic, muhkadirat or narcotics are any substance that makes a person feels sluggish and lazy, deprives sensation, and covers mind.
