With rec on horizon, California under the gun to establish medical marijuana regulations

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By John Schroyer

It ain’t over till it’s over.

The California Legislature has tried and failed for three years running to pass a law setting up statewide regulations on the medical marijuana industry, but lawmakers haven’t thrown up their hands in despair just yet.

A key legislator predicted at least one more attempt in advance of the 2016 general election, when voters could get the chance to legalize recreational cannabis.

, With rec on horizon, California under the gun to establish medical marijuana regulations

Many observers say it’s crucial to pass regulations on medical marijuana businesses before that election. Otherwise, California could end up in a situation similar to the one in Washington State – where the rollout of recreational cannabis stumbled in part because officials never enacted regulations on medical marijuana businesses.

“I think next year you’ll see a bill introduced based on the bill that we just worked on,” said California state Sen. Lou Correa, D-Santa Ana, the primary sponsor of Senate Bill 1262, the latest failed attempt at MMJ regulations in California. “I think you’ll probably see a bill very similar to this one, maybe with some tweaks.”

Volatile industry

In the absence of state regulations, California MMJ businesses have endured patchwork regulations that vary from city to city and county to county. That has created a disjointed, volatile and unpredictable industry, making California one of the most difficult states for medical marijuana companies.

The lack of state rules also leaves many dispensaries vulnerable to raids from federal agents, since there’s no cohesive set of guidelines for businesses to follow. This make it impossible for businesses to comply with key stipulations in the Department of Justice’s Cole Memo from August 2013.

“The Department’s guidance in this memorandum rests on its expectation that states and local governments that have enacted laws authorizing marijuana-related conduct will implement strong and effective regulatory enforcement systems,” the memo reads.

Senate Bill 1262 attempted to address this situation, but it died in the waning days of the 2014 legislative session when it failed to get out of the Assembly Appropriations Committee.

The final version of the bill would have cost $20 million to create a brand-new agency, the Bureau of Medical Marijuana, within the Department of Consumer Affairs. Among other things, the bill would have also mandated that MMJ businesses pay a $8,000 provisional licensing fee, required minimum security standards be established for dispensaries, and also forced annual audits for all dispensaries.

Additionally, the bill would have authorized taxes on marijuana cultivation, storage, distribution and sales.

“The other problem that we see is that in the absence of a state agency and a real trusted regulatory body, a lot of localities are not going to see the opportunity to move past (dispensary) bans,” said Sean Donahoe, deputy director of the California Cannabis Industry Association, which backed SB 1262. “Until we see a state-level agency, there’s going to be a lot of skepticism and a lot of hesitation by localities in deciding to move forward with anything in terms of regulation or ordinance framework.”

The CCIA admitted that SB 1262 was “far from perfect,” and several other marijuana advocacy organizations opposed the bill for varying reasons. The California NORML chapter said in a statement that the bill would “exacerbate chaos” in the industry, the Drug Policy Alliance charged that the poor would disproportionately be affected by a provision that prohibits anyone with a felony conviction from getting a business licenses, and groups such as the California State Association of Counties said the bill infringed on local control over MMJ businesses.

Clock ticking

Correa said it’s “too soon to say” what kind of changes his bill might face under new authorship, since he’s term-limited and won’t be back in the Senate next year. But, he said, his sense is that there’s a feeling at the state Capitol that regulation needs to be passed, and said the first step for legislators next year is to “go back and make sure the coalition exists where we had it last time.”

“We need to regulate medical marijuana. And I think next year will likely be the year that California moves forward a regulatory process to do just that,” Correa said.

The key is to build on this year’s momentum and pass regulations on the medical marijuana industry before voters have a chance to legalize recreational marijuana in November 2016, which could usher in a host of changes.

“We’d like to see a bill that regulates the industry as it actually already exists,” Donahoe said. “We just do not have a clear set of guidelines.”

The owner of the Los Angeles MMJ dispensary Kind For Cures said he hopes legislators will continue working with MMJ business owners to craft the best law they can in advance of the potential recreational vote.

“I’m encouraged by the way things are going,” said the owner, Nick, who asked that he be identified only by his first name. “Two years from now, the landscape is going to be completely different. Five years from now, we’re going to be like, ‘Remember when?'”

Nick added, however, that the state may be too late to save a lot of legitimate businesses that are being run out of L.A. by new local regulations and crackdowns from the city.

“The city is making it tough for anyone to even be in business legally,” Nick said. “It’s a very hostile situation; they’re trying to throw the baby out with the bathwater.”

John Schroyer can be reached at Johns@mjbizmedia.com