2017 California Legislative Guide for the Cannabis Industry

This is the first posting in a series intended to provide an overview and ongoing updates of California lawmaking during 2017. Over coming days and weeks, we give an overview of the 46 different items currently pending in Sacramento, including legislation, budget bills, joint resolutions, and the Governor’s budget proposal, each of which may affect how cannabis is regulated in California.

Today, we will address AB 64 and AB 171, two of the twelve pending bills directed at cannabis licensing and regulation.

Overview of California’s Current Legislative Calendar

The last day to introduce legislation was February 17, 2017, and there are now 42 bills pending in the California State Legislature. Over the next 7 months, the legislature will discuss those bills in various policy committees and floor sessions, and the legislature has until September 15, 2017, to pass each bill. The governor ordinarily has 12 days to sign or veto bills passed by the legislature; for bills passed at the end of the legislative session, the last day for the Governor to sign or veto bills may be as late as October 15, 2017.

AB-64 (Bonta) – “Cannabis: Medical and Recreational: Regulation and Advertising”

AB 64 has turned into a sort of omnibus bill addressing many different facets of the cannabis industry. The stated purpose of AB 64 is to begin the effort to reconcile and unify the regulatory structures under the Medical Cannabis Regulation and Safety Act (“MCRSA”) and Adult Use of Marijuana Act (“AUMA”). Most notably, AB 64 addresses the ability of operators to operate for profit and the State of California’s recognition of cannabis related trademarks.

Specifically, AB 64 explicitly provides that licensees under the MCRSA may operate for profit or not for profit as well as authorizing collectives and cooperatives, pre-licensure, to operate both for profit or not for profit. The bill would limit the protection for collectives and cooperatives operating for profit to those possessing a seller’s permit from the State Board of Equalization and a local license, permit, or other authorization.

Another important provision relates to California’s recognition of cannabis related trademarks. Existing law, the Model State Trademark Law, provides for the registration of trademarks and service marks with the Secretary of State and requires the classification of goods and services for those purposes to conform to the classifications adopted by the United States Patent and Trademark Office (“USPTO”). Because of the Schedule I status of cannabis, the USPTO will not issue a trademark for cannabis because the federal government does not consider the trademark to be in “lawful use in commerce”.

AB 64 would define cannabis and related products and services as recognizable “lawful uses in commerce” for trademark purposes. It authorizes the California Secretary of State to begin issuing certificates of registration on January 1, 2018, for trademarks in connection with such goods and services.

Another component of AB 64 relates to retail sales and mobile delivery. Both MCRSA and AUMA impose a state license requirement for in retail sale or delivery or cannabis. Under the MCRSA, persons may engage in those activities with respect to medical cannabis with a Type 10 (“dispensary”) or Type 10A (“producing dispensary”) license. Under AUMA, persons may engage in those activities with respect to nonmedical marijuana with a Type 10 (“retailer”) or Type 12 (“microbusiness”) license. Here, AB 64 makes the dispensary, producing dispensary, or retailer license available to operators with both storefront locations and non-storefront locations (those lacking direct physical access for the public).

AB 64 also concerns advertising. AUMA prescribes various restrictions on the advertising or marketing of marijuana and marijuana products applicable to commercial marijuana licensees. These restrictions include, among other things, a prohibition on advertising or marketing on a billboard or similar advertising device located on an interstate highway or a state highway that crosses the border of any other state. AB 64 would expand that prohibition to all interstate highways or state highways and would apply the expanded restrictions to all entities regardless of licensure under AUMA. The bill would place similar restrictions and requirements on the advertising or marketing of medical cannabis and medical cannabis products.

Another provision of AB 64 relates to taxes. Under the AUMA, commencing January 1, 2018, California will impose a tax on the purchase of cannabis and cannabis products at retail, with a separate tax on cultivation. The revenues from these taxes are required to be allocated for specified purposes pursuant to a specified schedule.

Under AUMA, these allocations include an annual allocation to the Department of the California Highway Patrol beginning fiscal year 2018-2019 until fiscal year 2022-2023, for the purposes of establishing and adopting protocols to determine whether a driver is operating a vehicle while impaired. This allocation includes making grants available to public and private research institutions for the purpose of developing technology for determining when a driver is operating a vehicle while impaired. AB 64 would advance $3,000,000 as a loan from the General Fund to the Department of the California Highway Patrol for use in the 2017-2018 fiscal year for those purposes and would require those moneys to be repaid from California Marijuana Tax Fund.

AB-171 (Lackey) – “Medical Cannabis Regulation and Safety Act: Licensure and Reporting”

Under existing law, MCRSA requires each licensing authority to prepare and submit to the legislature an annual report on the authority’s activities, and to post the report on the authority’s web site. The licensing authority is required to include various information in that report, including, among others, the number of state licenses issued by that authority. AB 171 would also require a licensing authority to include in its annual report the number of conditional licenses issued.

Please contact Rogoway Law Group with any questions regarding these pending cannabis industry related bills, or if you have any other questions about the  legal landscape governing cannabis in California.

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