Opinion: Regulatory changes threaten California’s ailing cannabis industry

Just Released! Get realistic market forecasts, state-by-state insights and benchmarks with the new 2024 MJBiz Factbook member program, now with quarterly updates. Make informed decisions.

Image of palm trees overlaid on cannabis leaves
Image of Nate Bradley
Nate Bradley

When California voters approved Proposition 64 in 2016, they did so based on the idea that a legal cannabis market would be a thriving cannabis market.

Our goal was to create a California cannabis industry that was poised to be a national model.

And, if the right moves were made at the federal level and marijuana were to be legalized, California cannabis would be as sought after worldwide as California wine.

However, fast forward to today, and California’s legal market is teetering on the brink of disaster, hindered by a thriving illicit market, high taxes and burdensome regulations.

Case in point: The state Department of Cannabis Control once again is tinkering with the regulations for every license type in the supply chain.

Another public comment period regarding proposed rule changes just concluded.

One of the most crippling of all the proposed changes would deal a major blow to cannabis businesses that manufacture tinctures – a key product utilized by patients who rely on medical marijuana products.

Section 17302.1 of the amended regulations would cap all cannabis tinctures at 2 fluid ounces.

The manufacturers of cannabis tinctures, since Day One of legal sales in California, have created a large customer base, one that has become accustomed to properly dosing these products in a safe manner.

Patients often favor a larger-format, 1,000-milligram tincture – mainly because it isn’t always easy to find legal retail in their area because far too many jurisdictions ban legal marijuana activity.

Customer confusion and consistency

The proposed change to limit nonalcohol-based glycerin tinctures to 2 ounces would not only create customer confusion, but it would also remove the consistency they have become used to.

It would ultimately lead to patients accidentally taking a higher dosage, which would have severe public safety impacts.

While the proposed change was likely made to bring consistency to regulations regarding cannabis tinctures – alcohol-based and nonalcohol-based – every change in regulation has real consequences for California’s fledgling industry.

In fact, the unintended consequences of this amendment would be drastic on many fronts.

If manufacturers are forced to halt production and retool packaging to attain compliance, their already-tight profit margins would evaporate, forcing them to lay off employees at a time when many Californians are already struggling with the high cost of goods, services and housing.

Additionally, since many tincture manufacturers have been in business for some time, they have likely purchased in bulk for future production and are housing hundreds of thousands of plastic bottles and custom boxes that would be rendered useless by this change.

They would need to throw entire warehouses worth of packaging into the trash, resulting in tens of thousands of dollars lost while also negatively impacting the environment.

On top of that, why kill the golden goose? For years, legal marijuana manufacturers have generated millions of dollars in tax revenue for the state and local jurisdictions.

Tax revenue would dry up

Cannabis taxes are the only guaranteed revenue stream in the state budget for child care for children from birth to 13 years old, enabling more than 21,000 children to be in subsidized child care.

If the proposed rule change in 17302.1 is adopted, that revenue would dry up quickly.

This regulation change would be too significant to overcome for many licensed operators – not just for manufacturers but for the entire cannabis supply chain in California.

It would affect:

  • Retailers with thousands of tinctures on their shelves.
  • Distributors with thousands of units sitting in their inventory.
  • Testing laboratories with fewer products to test.
  • Oil suppliers that will definitely feel a sharp decrease in business if this change is enacted.

It’s long past time to start thinking about the greater good for patients and the industry operators who have jumped through every hoop set in front of them.

Regulatory changes are fine, but let’s make changes that help good operators stay in business and protect patients, not changes that will force marijuana business licensees to hang up their closed sign for good.

Nate Bradley is the executive director of the Cannabis Consumer Policy Council. He can be reached at nate@join-ccpc.org.

To be considered for publication as a guest columnist, please submit your request here.