Haze Surrounding California Marijuana Regulations Is Starting To Clear

On January 1, California will begin issuing licenses allowing businesses to legally sell marijuana for recreational use.

At a 50,000-foot view, here’s what an entrepreneur looking to operate in the cannabis industry needs to know about the new regulatory environment.

Back in November 1996, California voters approved Proposition 215, which decriminalized the use of medicinal marijuana in the State, but it wasn’t until October 2015 that the state enacted regulations governing its sale and distribution. Then, in November 2016, voters approved Proposition 64, legalizing recreational marijuana use for adults 21 and older.

On June 27, 2017, Governor Jerry Brown signed the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), combining the regulations governing medicinal and recreational marijuana into one law. Under MAUCRSA, the sale of marijuana will be governed by the Bureau of Cannabis Control.

Approval process

Local legislation is a key factor in the approval process. To get a state-issued license, businesses must first find a local jurisdiction that allows them to operate and must be operating in compliance with all local-level regulations.

Presently, there is a scramble to find local jurisdictions that are embracing the industry. Some smaller cities see the potential for tremendous tax revenue and are welcoming cannabis businesses, but others are struggling with competing constituencies and are tepid to embrace the industry.

After a business submits a license application, the state will contact the local city or county to determine whether the proposed operations will be in compliance with local law. If the city does not respond within 60 days, the state will presume compliance. But if the city responds that the applicant is not in compliance (or if the city has not yet passed any regulations allowing the sale or distribution of recreational marijuana), the business will not be able to get a license.

Additionally, prior to receiving a license, applicants (including all owners of a business) must submit fingerprints and pass a general background check. Licenses will not be issued to persons convicted of certain felonies.