By Kathleen E. Finnerty, Esq.
Medicinal marijuana has been legal in California since 1996. When the Compassionate Use Act of 1996 passed, people went to their doctors in droves because they were finally able to legally use marijuana upon advice of a doctor.
According to ProCon.org, as of March 2016, an estimated 758,607 California residents are card-carrying marijuana patients, who can legally purchase cannabis from medicinal dispensaries.
Now that Proposition 64 (Adult Use of Marijuana Act or “AUMA”) has passed, adults (those over the age of 21) will no longer need a medical card to consume cannabis products in designated businesses or in the comfort of their homes.
One would expect countless Californians to be dancing in the streets now – blasting Jefferson Airplane while relaxing on their favorite hammock or passing a bong with their closest friends.
But, what does this mean for you? What exactly does Proposition 64 say?
Here we discuss the elements of Proposition 64, how it works, and what it means for the recreational marijuana in California.
Not surprisingly, it’s not all roses and hand blown pipes for all. Even some in the cannabis industry opposed the proposition.
Keep reading to find out why this proposition is good for California, yet may have some negative impact on certain Californians.
California Proposition 64 – Legalization of Adult Use of Recreational Marijuana in California
Proposition 64 won in a landslide with 8 million voters choosing “Yes” on their ballots. But, what exactly does that mean?
According to the Proposition, cannabis use will still be illegal anywhere where smoking cigarettes is, anywhere in public, and while driving. You can only legally smoke pot in your home or at designated businesses.
You can face fines of up to $100 for smoking in public.
You need to be 21 or older to buy marijuana, as with alcohol, and sellers must abide by a massive set of state regulations.
You also won’t see advertisements for marijuana on television or radio. Since Mary Jane is still illegal at the federal level, advertising across federal air waves is strictly prohibited.
While this is good news for the Californians who are excited to imbibe, who benefits the most from legalization of adult use of marijuana?
California state and local governments are poised to collect millions of dollars in tax revenue off the cultivation, manufacture, transportation and sale of cannabis. Recreational marijuana in California is subject to two new excise taxes:
A cultivation tax of $9.25 per ounce for flowers and $2.75 per ounce for leaves, with exceptions for certain medical marijuana sales and cultivation; and
A 15 percent tax on the retail price of marijuana.
With California already having the highest sales tax rate in the country at 7.25%, 15% additional tax at the retail level, on top of a 15% tax to the cultivator (which is a cost that naturally flows through to the consumer) results in a substantial hit for the marijuana consumer. For many, however, the ability to legally purchase cannabis without risk of arrest is a worth the cost.
Exactly How Legal Are We Talking?
Immediately upon passing, Proposition 64 meant it was no longer illegal to buy, possess, or transport limited amounts of marijuana for personal recreational use.
A person can cultivate up to 6 plants inside their home so long as the cannabis is not visible to the public. That cannabis cannot be sold however; it must only be for personal use.
A person cannot use cannabis at all, including edibles, unless at home or at a business licensed for on-site marijuana consumption.
What Does This Mean For Me?
If you use cannabis, it means you no longer need to hold a medical permit for your cannabis.
For the savvy entrepreneur, opportunities abound. The legalization of recreational marijuana in California has unleashed an entire industry – and the Green Rush stands to vitalize the California economy in astronomical ways.
Traditional businesses, such as irrigation, heating and air conditioning, greenhouse construction, software, lighting, packaging and even insurance, are embracing the multitude of new opportunities creating in this long-prohibited industry. The opportunities appear to be infinite, and the craft and creativity of those in this industry is impressive.
The National Cannabis Industry Association (“NCIA”) just completed its Cannabis Business Summit and Expo in Oakland. Over 4,500 people attended the conference, and over 750 vendors displayed and demonstrated their wares (where legal) in over 80,000 square feet of booths and demonstrations. Top industry leaders convened to educate and share ideas about current legal and business challenges. Many thought leaders extolled the need for best practices to protect this burgeoning industry from over-regulation and corruption.
Yes, you can open a cannabis business. To explore this opportunity, and its multiple layers of state and local regulation, please see our licensures and registration page.
This industry is so new, and complex, we recommend that you speak with a lawyer that specializes in the aspect of marijuana law that is important to you. Remember, criminal lawyers defend against crimes, while business lawyers, tax lawyers and real estate lawyers specialize in their respective areas of expertise.
Every new industry come many stops and starts, and the risks in cannabis are great. Proper legal representation can be the difference between success and bankruptcy, or even jail, when treading new, yet treacherous, waters.
What Comes Next?
California is in the process of writing the entire scope of regulations for an industry that has long been unregulated. Given that California is projected to be the largest cannabis market in the United States, this is a Herculean task.
California’s proposed regulations for cultivation, manufacturing and sale of cannabis were posted for public comment on April 28, 2014. The public comment period for the cultivation regulations officially ended June 14, 2017. The public comment period for dispensaries, transportation, distribution only and testing lab regulations will close June 20, 2017. After the comment periods close, the regulators will review and consider the numerous comments received, and will make revisions where the comments are consistent with the purposes of the regulations; namely:
safeguarding of the environment through implementation of environmental protection measures and enforcement of existing environmental protection laws;
creation of legitimate businesses and tax revenue sources;
increased worker safety through enforcement of existing employee protection laws; and
reduction in crime.
It is important to note that the regulatory community wants to work with the cannabis industry to develop regulations that encourage compliance, and assist the industry. Lori Ajax, the Director of the Bureau of Medical Cannabis Regulation, who is commonly referred to as the Pot Czar of California recently emphasized the importance of working with the community. Ajax says the goal of their community outreach is to educate and pull those businesses into state compliance.
“We want them to come into the regulated market and stay in the regulated market,” said Ajax.
Ajax also said that the agency fully expects to make changed to the proposed regulations after input from the public. Those final regulations are scheduled to be issued in October, 2017, with licenses being first issued on January 2, 2018.
We can expect more regulations as the industry matures. Key features of the regulations also include consumer protections in sanitation methods of product handling, proper weighing and labeling of products, child-proof packaging and strict inventory controls to prevent products from being diverted to illegal uses. Staying abreast of these ever-changing regulations will be critical for all business owners.
Is Proposition 64 Good or Bad for California?
Many in the cannabis industry, particularly those who advocated during the era of “prohibition” caution that the industry must protect itself to survive. Without substantial compliance with the new regulations, maintaining good working relationships with the regulators, and mitigating adverse publicity (e.g. hash explosion caused by improper handling), the industry could be crushed overtime by overregulation.
Importantly, because of the significant profits to be made, many fear that large corporations will take hold in the cultivation sector and drive the small, craft growers out of the market. Governor Brown recently included protections for small enterprise, to maintain the art and craft of cannabis cultivation, by authorizing appellations and other market distinguishers to promote the small to mid-size operators that currently comprise most of this industry.
A lesser known part of the proposition also requires what is known as seed-to-sale tracking. This process is designed to track of the path of a cannabis product from its status as a seed to its end-product. This is a complex process, that requires rather intensive software investments by all persons and businesses that touch the cannabis in the supply chain. The purpose is to allow for better quality control, but also to prevent product from being dissipated outside the legal marketplace.
Many farmers are concerned that the regulations impose costs that are simply too high for many small farmers, and will simply the corporatize the marijuana industry.
Please remember that cannabis is still a Schedule I drug at the federal level and therefore illegal to possess or consume. This means that the federal government could arrest and punish growers, manufacturers, retailers and even consumers. Please don’t carry or consume cannabis on federal property, and be particularly cautious when travelling across state lines.
With more states legalizing medical and recreational cannabis every day, are we headed toward marijuana being completely legalized? Only time will tell, but in the interim, let’s work together to make this industry the best it can be.
If you are interested in starting your own marijuana based business, please contact us.