California Adopts Changes to Medical Cannabis Rules

On June 27, after passage by both houses, Governor Jerry Brown approved SB837, which makes a number of changes to the medical cannabis regulatory system in California. Many of the changes are of a technical and clarifying nature. The full text of the changes is, of course, on the state legislature's website. We highlight below the changes of practical import.

First, the Bureau of Medical Marijuana Regulation (abbreviated "BMMR" and sometimes called "bummer") will now officially be known as the Bureau of Medical Cannabis Regulation. We put out a request a few weeks ago for witty pronunciations for "BMCR". "Bum-kicker" is the best we've heard, and it ain't great.

Second, SB837 gives the Department of Public Health authority, along with the Department of Food and Agriculture, over cannabis cultivation licenses. It also gives DPH power to issue citations for violations such as misbranded or adulterated product, and allows an adminstrative law judge to order destruction of product if necessary.

Third, SB837 recognizes and supports the adoption of "emegency" regulations under MMRSA. This will allow the regulating agencies a bit more flexibility in getting their initial round of regulations approved so that the licenses can begin to issue in January 2018 as the statute contemplates. This is a recognition that the regulatory development process is going to be a race.

Fourth, SB837 clarifies the legal status of operations that have started or will start prior to January 2018 and therefore do not have (and cannot have) a state license. Under SB837, such a business -- with a local license and following state rules -- may stay in operation in 2018 even though it does not yet have a state license, so long as it submits a state license application by a deadline to be set by the governing agency. Of course, if the regulatory agency denies the license application, then the business will have to shut down.

Fifth, SB837 addresses concerns that have been raised about mandatory distribution. While distributors are still required, where product is sent to a manufacturer for processing (e.g., extraction), the distributor need not be involved until after the manufacturing is complete and the product is ready for retail. Previously, the MMRSA required that a distributor be involved twice for manufactured products -- once between the grower and the manufacturer and once between the manufactuer and the retailer. SB-837 makes clear that a distributor now need only be involved once in that supply chain. Relatedly, the law allows manufacturers and cultivators to hold transporter licenses to transport product between a grower, a manufacturer, and a distributor.

Sixth, SB837 creates a variety of new rules for water use by cultivators. License applications will now need to identify water sources, including any retail water supplier, any diversion of surface water, and any groundwater extraction, and applicable permits.

Seventh, SB837 changes the former "special dispensary" license to a "producing dispensary" license (Type 10A). This allows single licensee to operate up to three dispensaries and also receive a manufacturing license and a cultivation license up to 4 acres of canopy.

Eighth, and finally, SB837 exempts cannabis seeds from the California Seed Law. As a result, cannabis seeds that are sold will not be subject to certain labeling requirements applicable to other seeds sales.