(This is a regular column that delves into the widely varied and complicated issues surrounding California’s immense cannabis market from the vantage point of Marijuana Business Daily Senior Reporter John Schroyer. Based in Sacramento, he’s been writing about the cannabis industry since joining MJBizDaily in 2014.)
Product recalls. Threatened lawsuits. At least one criminal case against an unlicensed retailer as well as an unlicensed delivery firm.
That’s a lot – but far from all – that’s currently happening in California’s marijuana industry.
Here are just a few of the recent news tidbits that have been circulating in the state.
Delivery fight brewing?
When the California Bureau of Cannabis Control (BCC) in July released its first draft of permanent statewide regulations, perhaps the most contentious policy shift was this one: The BCC is poised to allow delivery to any consumer in the state – regardless of whether the order is placed in a city or county that has banned MJ sales.
That might have ramifications for the still-struggling legal industry, in large part because opening up broader sales avenues through delivery could help many businesses that are having a hard time competing with the illicit market.
The industry, naturally, embraced the change, arguing it fulfills voter intent from 2016’s Proposition 64 to guarantee access to legal cannabis for residents across the Golden State, and to help combat the illicit MJ market.
But that support may not be enough, and it could come down to a ruling from an administrative law judge as to whether the BCC overstepped.
Some pro-marijuana lobbyists have called the shift in delivery policy a “clarification” instead of a rule change because licensed MJ companies are already guaranteed legal access to public roads.
At two hearings in the past two weeks, at least three stakeholders – representing the cities of Temecula and Beverly Hills as well as the United Food and Commercial Workers Union (UFCW) – have indicated that a swath of local authorities are considering filing suit against the state because they consider it a breach of their local power to regulate marijuana.
“This is ripe for a lawsuit,” Matt Rahn, chair of the Cannabis Advisory Committee and mayor of Temecula, said during an Aug. 20 hearing.
A representative from Beverly Hills warned the advisory committee: “You guys don’t have this authority. … This will be challenged, legally.”
At the BCC’s most recent public hearing on Aug. 27, Ed Howard, a registered lobbyist for the UFCW, told regulators: “Based on 20 years of litigating administrative law cases … it’s regrettably true that the prospects of (delivery statewide) surviving a legal challenge are particularly poor.”
However, no city or county has taken the step to formally challenge the policy shift, and a spokesman for the League of Cities said he’s unaware of any specific lawsuits being prepared.
“We’re watching and waiting right now,” noted League spokesman Charles Harvey. “We are hoping that we don’t even have to make that decision. … Our member cities, of course, with the harm there that they could claim – they could certainly bring suit if these are finalized.”
So, if the BCC decides to keep its existing policy of allowing legal delivery operators to transport cannabis products to any residence in the state, it could very well wind up in court.
Also tied to the delivery fight has been the behind-the-scenes work of Steven Domingo from WeDrop, a longtime cannabis delivery service. He and his allies have been lobbying for the change to allow delivery statewide, even though WeDrop isn’t operational right now.
Domingo temporarily closed down WeDrop earlier this summer to move from Oakland to Sacramento, which has lower marijuana tax rates. Domingo hopes to be up and running in another few months.
He’s one of many who’ve decided to exit the market and regroup for a short period around the July 1 regulatory transition in which new testing regulations took effect.
I heard something similar from Tuan Le at Brite Labs, an Oakland vape cartridge manufacturer. Le believes that plenty of licensed brands and companies could return to the market soon – depending on when they can get all their I’s dotted and T’s crossed.
Both Domingo and Le, however, suggested the temporary exodus from the market will end in a few months.
That should come as a relief to retailers desperate for variety on their menus, since many are suffering from limited product options to offer customers.
Another complication involving retail businesses is that there’s still an ongoing debate over packaging rules. July’s first draft of permanent regulations was another major pivot, which put the onus on retailers instead of manufacturers to provide child-resistant packaging.
Whether that will remain in the final regulations later this year is to be determined, but there’s a lot of lobbying going on to reverse that rule and put the burden back on manufacturers.
Regardless, what it means right now for edibles makers and others is that they can’t be certain if the current rules will remain in place or change once again.
That would naturally make any such company hesitant to move forward with tens of thousands of dollars in new packaging.
It could make better business sense to wait a few months until regulations are finished and then rejoin the market with as much saved-up capital as possible.
(Click here to read the previous installment of this ongoing column.)
John Schroyer can be reached at firstname.lastname@example.org