BETTER ASK GLEW: LEGALIZATION PLUS ONE BY
Orange County’s top cannabis attorney and expert Chris Glew on the state of legalization in 2019
BY NICK SCHOU
OC Weekly: It’s been a year since recreational marijuana became legal for adults in California. What are the biggest changes that have unfolded in the industry in the past 12 months?
Chris Glew: Has it been 12 months already? It has been a crazy ride on so many levels. From a local, state and federal perspective, the past year has been very dynamic. Local liberalization and expansion have been the most effected over the past 12 months. The key component is a large expansion of cities coming online with new licensing opportunities. In Santa Ana in the past year, we have expanded from 20 licensed retail shops to 30 licensed retail and unlimited distribution, manufacturing, cultivation and testing facilities.
One year ago, Santa Ana cannabis operators had to perform all of their cultivation, manufacturing and distribution outside the city. Now, there is vertical integration licensing for all 30 retailers in the city. This new model is allowing for larger scaling and investment options. Santa Ana saw approximately $5 million in revenue for the city coffers from 19 retail shops last year with that number expected to at least double if not triple once these new licenses are operational. Long Beach has also, finally, come online this past year.
Long Beach is another example of a vertically integrated city that has a very large number of licensed facilities. A vast majority of the Long Beach licensees are approaching the final stages of their build-outs, and that will further expand the 2019 footprint. There are too many cities to list that have come online in the past 12 months, but some of the other golden gems are Culver City, Pasadena, Chula Vista, Riverside County, Lake Elsinore, Mountain View and Moreno Valley, to name a few. This radical expansion has caused large investment from all over the globe as the California marketplace is ripe for large-scale commercial expansion.
The state has been very busy as well. The Bureau of Cannabis Control (retail, testing and distribution), CDFA Cal Cannabis (cultivation) and CDPH Manufactured Cannabis Safety Branch (manufacturing) are all actively implementing the regulatory framework set up by the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). This roll-out has resulted in the closure of numerous rogue shops, advances in the seed-to-sale tracking, public accountability, consumer-safety enhancements and lots of new adaptations to the regulatory framework itself. The state’s continued efforts to shut down the illegal shops is a major step toward allowing the licensed facilities to reach their full potential. The state also rolled out its enhanced testing protocols. The final stage, category 3, is now in effect and provides the consumer with a consistent, safe cannabis experience. The state has now issued the last of the temporary cannabis licenses, and all new licensees will have to apply for an annual license.
The federal piece of the puzzle is more complex, to be certain. As local and state governments work to roll out expansion, the federal government has remained firmly entrenched in a draconian mindset. However, many things happened in 2018 that set the table for a more states’ rights and liberal policy-minded 2019. Numerous congressman have been working diligently toward a much-needed banking solution for the cannabis sector. Once cannabis providers are given a merchant account solution, the industry will really take off.
Jeff Sessions’ departure was seen as a set-up for a declassification push, and momentum remains. But the real positive news is that the other Sessions, Pete Sessions the congressman, is out. The man that many cannabis supporters have described as the leading prohibitionist in congress, Pete Sessions obstructed 30-plus-cannabis-related bills during his tenure. His departure in 2018 should be just the catalyst needed to spark cannabis-friendly congressional reforms in 2019. Major hurdles still exist at the federal level, such as the ultra-discriminating 280E tax code, but 2019 looks promising.
OCW: Given that cannabis dispensaries remain outlawed in many cities, how do consumers access recreational marijuana in those areas? And what remains of the medical-marijuana system that used to exist before recreational marijuana? How does California’s new regulations measure up to what has been accomplished in other states?
Glew: Even with the expansion of licensed retail shops and non-storefront deliveries, the vast majority of Californians reside in jurisdictions without licensed cannabis facilities. Most of these consumers are still relying on the ubiquitous unlicensed (rogue) shops. While enforcement has been steadily climbing, there are still plenty of rogue facilities for a cannabis consumer to choose from. For those consumers who are amenable to the delivery option, there are both licensed and unlicensed deliveries that service the entire state. The licensed delivery providers gained a lot of traction in 2018 and are set to post record numbers in 2019 as they seek to surpass the rogue delivery providers. Cannabis consumers outside the accessible radius of licensed retail facilities will have even more qualified, insured, live scanned, licensed providers to choose from in 2019.
The Bureau of Cannabis Control announced on Jan. 9, 2018, that Section 11362.775 of the California Health and Safety Code would no longer be in effect. This announcement was a declaration of termination for the collective/cooperative medical-marijuana models that were the hallmark of the California cannabis landscape for the past 20 years. MAUCRSA provided this sunset provision applicable to patients and caregivers that were in full compliance with state and local laws. So the Compassionate Use Act/Medical Marijuana Program, Health and Safety code sections 11362.5, 11362.765, 11362.775, 11362.7 and a litany of California case law remained in effect for the past year. However, as of Jan. 9, 2019, the old model is officially gone and is no longer the affirmative defense to state charges. Now, a cannabis retailer, manufacturer, distributor or cultivator must show full licensed compliance with all state regulatory mandates.
Visit ocweekly.com soon for more Better Ask Glew updates about the cannabis industry in California, especially Orange County and Long Beach.