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Understanding the Medical Marijuana Regulation and Safety Act

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Regulatory Structure

The MMRSA establishes the Bureau of Medical Marijuana Regulation under the Department of Consumer Affairs. The Dept. of Food and Agriculture has responsibility for regulating cultivation and processing, and the Dept. of Public Health for developing standards for the manufacture, testing, and production and labeling of all cannabis products; the Dept of Pesticide Regulation for developing pesticide standards. See SB 643, adding Section 19332(g) of the Business and Professions Code, hereinafter (“B&PC”).

License Types

The following categories of licenses are established under THE MMSRA (AB 266 adding B&PC 19300.7):

Vertical Integration

Under the MMRSA, licensees can only hold licenses in no more than two separate license categories (AB 266 adding B&PC 19328(a)). For example, testing and distribution licensees will not be able to hold any other class of license (AB 266 adding B&PC 19341(c)).

There are a few exceptions, however. Businesses operating in local jurisdictions that require or allow full vertical integration of their supply chain (cultivation, manufacturing and dispensing) will be allowed to continue operating as they do now (AB 266 adding B&PC 19328(c)). There is also a specialty dispensary license modelled after “brew pub” license, which allows for a licensee to be vertically integrated if they operate no more the 3 retail sites, hold only 1 manufacturing license, and own no more the 4 acres of licensed cultivation sites in the state (AB 266 adding B&PC 19328(a)(9)). Both of the above exemptions are only good until Jan 1, 2026 unless extended through the state legislature (AB 266 adding B&PC 19328(d)).

Mandatory Distribution

While licensed manufacturers and cultivators will have to send their product to a distribution licensee for quality assurance inspection and lab testing before selling it to a dispensary, they will not be required to sell their cannabis to the distributor (AB 266 adding B&PC 19326(b)).  The bill clarifies that farmers and manufacturers will be able to maintain direct contracts with dispensaries and set their own prices (AB 266 adding B&PC 19326(c)(3)).

Medical Cannabis is Now “Legal”

The industry no longer has to rely on an “affirmative defense” to operate. All actions by licensees that are permitted by both a state license and local government are now legal and protected from arrest, prosecution, asset forfeiture and other legal sanctions under California law (AB 266 adding B&PC 19317).

Operating For-Profit

Licensees will not be prohibited from operating “for profit”. Section 6 of AB 266 repeals the existing Medical Marijuana Program Act, and the non-profit mandate with it (AB 266 amending Section 11362.775 of the Health and Safety Code).  Additionally, the MMRSA defines eligible applicants to include for-profit business entities (AB 266 adding B&PC 19300.5(aj)).

Seed Tracking

The state will require that all licensees take part in a “Track and Trace system” (SB 643 adding B&PC 19335).

Deliveries

Deliveries will be allowed only in cities and/or counties where not prohibited by local ordinance. All deliveries services will be required to have a local license from the locality they are based out of (AB 266 adding B&PC 19340).

Testing

Testing of cannabis will be mandated prior to delivery to dispensaries or other businesses (AB 266 adding B&PC 19341 to 19346).

Transportation

Once the regulations are implemented, a licensed transporter will be required to transport cannabis and cannabis products between licensees once a certain monetary threshold is met (TBD by regulating agency) (AB 266 adding B&PC 19326(a)).

Labor Agreements

An LPA will be required of all applicants with 20 employees or more, though supervisors/management don’t count. The union can’t strike or use work stoppages while negotiating or organizing. The union must hold a worker election by secret ballot and not a card check in order to organize a licensee’s workforce (SB 643 adding B&PC 19322(a)(6)).

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