California on Thursday unveiled its latest set of marijuana regulations—this time, emergency rules that will guide the legalized recreational market when it opens in January. The regulations published by the Bureau of Cannabis Control, the Department of Food and Agriculture and the Department of Public Health were shaped by early draft proposals and legislation enacted this summer. They cover testing, growing, packaging and potency requirements for both the medical and recreational sectors. And they will likely change. The state has created a Cannabis Advisory Committee, comprised of growers, retailers,union representatives and others with interests in the marijuana industry, to consider the regulations and suggest change. Here are a few takeaways from the emergency regulations presented to the committee on Thursday.
Everything's temporary, for now. Regulators will rely on temporary four-month licenses to get the market rolling on Jan. 1. To get those short-term permits, however, applicants will have to show that they have authorization to operate from their local government agencies. That may not be readily available, as some cities and counties are still grappling with how to handle recreational enterprises. The regular licensing process will ramp up in 2018. While that happens, the state will operate in a six-month transition period and allow retailers and operators to move and sell existing inventory that might not meet regulations on packaging or potency caps.
It's going to cost money—a lot of it—to make money. Everyone in the marijuana business will pay a licensing fee that varies significantly based on the size and type of operation. Someone who transports marijuana only—without performing any quality-control testing—will pay $500. The biggest distributors doing product testing will be charged $125,000 a year for a license. That's not counting the $500 to $1,000 that license-seekers will have to pay just to apply for a permit—or the costs for entrepreneurs who need multiple licenses. Regulation watchers have questioned whether California's fees, added to a 15 percent excise tax and local charges, will cost so much that small businesses will be squeezed out and the black market will continue to operate. Lori Ajax, bureau chief of Cannabis Control, said Thursday the agency worked with an economist to set fees so that they only cover state costs. As to what the impact of those fees might be, "There's much work to be done on our regulations," Ajax said.
California is about to enter the edibles shape-and-packaging debate. The emergency regulations ban edibles that appeal to children. For now, that includes no munchables in the shape of human beings—"either realistic or caricature"—animals, fruit or insects. Edibles must be covered in an opaque packaging, which can't "imitate" any products that are marketed to kids. Colorado has grappled with how to regulate edibles for years, a struggle amplified in 2014 when the chief medical officer called for an outright ban on consumable marijuana. Oregon approved recreational marijuana use in 2015 but did not allow edible sales until strict rules went into effect in 2016. Miren Klein, an assistant deputy director at the California Department of Public Health, conceded Thursday that deciding what packaging and products appeals to kids is a subjective endeavor. "We tried to outline as much as we could in this regulation package," Klein said. "If the committee has any other ideas or suggestions that we could consider for a permanent package we definitely welcome that." Klein said pre-approving each product is not feasible. Pointing to California's physical and market sizes, she said, "if you think our licensing fees are expensive now that definitely will drive up the licensing fees." Read more: IRS Power Is Challenged in Marijuana Dispensary's Supreme Court Petition Marijuana's Rapid Growth Could Put New Spotlight on Arbitration We Asked 4 Marijuana-Industry Lawyers 4 Questions. Here's What They Said Four Takeaways From California's New Report on Banking and Marijuana