When Californians decided to legalize cannabis in the elections of November 2016, it was largely expected that the state would quickly emerge as a market leader in the ever-growing US legal cannabis industry.
Having been the first state to legalize medical cannabis back in 1996, it took California another 20 years before the state would finally decide to legalize the drug for its recreational purpose back in that fateful election of 2016.
While much of the state (and the rest of the world) was left reeling following the shock victory of Donald Trump (the state had voted overwhelmingly in favour of Hillary Clinton), the decision to legalize cannabis in California was seen as the one largely positive outcome of that night with 57% of the states residents voting yes to legal cannabis (63% had also said yes to Hillary).
With the Californian economy now ranked as the 5th biggest in the world, it was expected that the legalization of cannabis would lead to a legal cannabis market greater than that of Colorado, Washington, Oregon and Alaska combined, according to Ethan Nadelmann, executive director of the Drug Policy Alliance.
However, the decision to legalize cannabis in California has not been without its struggles as the state wrestles with a variety of issues that have followed since the implementation of the new law on January 1 of 2018. Sales from unlicensed vendors, a weak supply chain that has left some shops with empty shelves and a proposal to allow home deliveries of cannabis in cities that have banned the sale of it, are just some of the issues facing the state today.
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New Requirements in California Cannabis Cultivation
With California still attempting to transform the formerly illegal cannabis market into a multibillion-dollar, regulated economy, an initial 6 month transitional period was implemented by The Bureau of Cannabis Control’s (BCC) in January but as of July 1st, that period has drawn to a close and with it, many exceptions of the state's rules have expired.
Going forward, all cannabis products sold in the state must now meet all statutory and regulatory requirements outlined by the BCC.
It is now mandatory that only lab-tested products that have passed all of the requisite testings for potency and a variety of contaminants can be sold in the state.
Additionally, edibles must now contain no more than 100mg of THC per package and must all also be served in 10mg servings. Furthermore, non-edible cannabis products cannot contain more than 1000 mg of THC, while non-edible medical products must not exceed 2000mg.
As part of the regulations, it is also mandatory that all products must be delivered to retail outlets in child-resistant packaging by licensed distributors.
Any cannabis products that fall foul of these rules must be destroyed as part of the states new regulations. As a consequence, it is expected that a whopping 350 million dollars worth of cannabis that fails to meet the new requirements could be destroyed in the coming weeks.
With many dispensaries having too much product and not enough time to sell it before the rule changes were implemented, many had started to sell non-compliant products at significantly lower prices while others were left with no choice but to destroy non-compliant cannabis.
While the law changes should ensure a higher standard of product reaches Californian shelves in the coming months, the transition to the new set of rules has created a variety of potential problems for some legal cannabis producers.
According to Nick Rinella, COO for Verdant Distribution, a third-party, independent distributor in California, the mandatory lab testing and stricter packaging requirements are the two biggest changes that are causing issues for legal cannabis cultivators.
“The testing and packaging requirements that started on July 1 have changed everything for a lot of folks,” Rinella told Cannabis Business Times. “A lot of folks were able to operate without the testing requirements, and now that you have that in place, you’ve seen a lot of brands drop off because they weren’t able to meet the testing requirements for their products.”
While some cultivators will welcome the enhanced regulations, others have also expressed concerns over the lack of licenses currently available to those wishing to grow legal cannabis in California.
Cannabis cultivators who operate in areas that have not yet allowed them to obtain licenses, (most notably Los Angeles the state’s largest market) are still unable to legally bring their cannabis products to the market. Unfortunately, this has resulted in many still purchasing cannabis from unlicensed vendors.
The new rules also highlight the significant issue of businesses that attempt to comply with the law, competing against those that do not even intend to apply for a license. As a result, these unlicensed vendors can sell cannabis at a cheaper price.
Adam Spiker, head of the Southern California Coalition, a cannabis industry group, claimed that
With many unhappy at the regulations, a hearing was held in August of 2018 by the Bureau of Cannabis Control so that dozens of California based cannabis business owners, industry lawyers, activists, and consumers were given a relatively paltry 90 seconds to offer their opinions on what needed to be done to create a fairer, more prosperous Californian cannabis marketplace.
A variety of issues were heard, with a shortage of licenses as well as concerns over the potential for big business dominance dominating much of the agenda.
While the hearing provided a platform for cannabis activists, it remains to be seen what changes will be implemented to the state’s cannabis laws in the months going forward.
Regulations to Ensure Higher Cannabis Standards for California
While the state continues to battle with new regulations and an-ever expanding market-place, it is essential that the industry is suitably governed so that all consumers in California have access to both legal and high-quality cannabis.
Rinella stated that while regulation changes were challenging, the rules were the same for all cannabis cultivators in the state.
“It’s just the same problem for everybody. I guess that’s the thing that they need to remember, that it’s not easy on anyone,” he said. “Everyone has to play by the same rules now, so compliance is key. You’re not going to be able to sell your products into the dispensary without compliant products—it simply will not happen. As expensive as it may seem, there’s just no quick fix and way around it. It’s better for a lot of these cannabis companies to accept that fact and to build that pricing into their model and determine how they want to enter the market because it’s a real thing—it’s a reality.”
Ultimately, when we don’t regulate our industries, they become hugely vulnerable to predators and charlatans looking to make a fast buck. While tighter regulations can, at first, create a wide range of difficulties for both producers and consumers alike, they are supposedly designed to ensure that we receive a higher standard of product in the long run.
Clearly, the cannabis industry has enormous potential for growth in California once the initial teething problems that it has endured in recent months are ironed out and while there are a variety of issues that do require urgent attention, it is expected that this great state will soon emerge as a potential leader in the US cannabis industry.