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RE: WINTER LLP Update - Passage of AB-97

Dear California Cannabis Clients and Friends,

The passage of AB-97 in July brought about several important developments to the California commercial cannabis regulations. Below, please find a quick summary of the changes, as well as additional information about upcoming bills that are of interest.

Provisional Licensure Requirements

Notably, the requirements to obtain a provisional commercial cannabis in California have changed.

Previously, under MAUCRSA, the licensing agencies (BCC, MCSB, Calcannabis) were authorized to issue applicants a provisional license if (1) the applicant held a temporary license for the same premises and same commercial activity as the applied-for provisional license; and (2) if the applicant submitted a completed license application to the appropriate licensing agency, including evidence that CEQA compliance was underway. Applicants must have applied for the provisional license prior to January 1, 2019. The provisional licenses were valid for 12 months from date of issuance and non-renewable.

Now, under the new law, applicants are no longer required to have held or hold a temporary license in order to obtain a provisional license. A provisional license may now be issued if the applicant has submitted a competed annual license application to the Bureau, including evidence that CEQA compliance is underway. Therefore, even if you did not have a temporary license or did not submit your annual application prior to January 1, 2019, you are still eligible to obtain a provisional license by submitting your annual license application now. Provisional licenses are still valid from 12 months of date of issuance, but may be renewable if there are outstanding items necessary to obtain an annual license. The provisional license will be canceled upon issuance of an annual license, denial of an annual license, abandonment, or withdrawal of licensure. The licensing agencies also have the authority to suspend a provisional license if the applicant fails to actively and diligently pursue requirements for an annual license.

Illicit Market Fines

Licensing agencies may issue a citation to any unlicensed person or licensee acting in violation of the CA cannabis regulations. As part of each citation, the licensing agency may assess an administrative fine not to exceed $5,000.00 per violation by a licensee and $30,000.00 per violation by an unlicensed person.

Organic Certification

The bill, not later than July 1, 2021, would require the State Department of Public Health to establish a certification program for manufactured cannabis products comparable to the National Organic Program and the California Organic Food and Farming Act. Persons are not allowed to sell or represent that cannabis or a cannabis product is organic until they have been certified by the Department of Food and Agriculture or the State Department of Public Health.

Equity Funding for Local Jurisdictions (SB-1294)

The BCC was appropriated $10 million to award to cities and counties to assist with equity applicants and licensees. To apply for grant funding, a local jurisdiction must submit an application and the required documentation electronically between July 31, 2019 and August 30, 2019. Jurisdictions that submit timely applications and meet eligibility requirements will receive a minimum grant of $100,000. If your city or county is interested in establishing an equity program or already has one in place, we encourage you to reach out to your city/county officials to apply for funding ASAP.

Additionally, please find a quick summary of pending bills that will be voted upon once the California Legislature returns from its summer recess on August 12, 2019. PLEASE NOTE, these bills have not passed and are not yet in effect.

CBD from Industrial-Hemp (AB-228, PENDING)

If passed, Licensees within the California cannabis regulatory framework may manufacture, distribute and sell food, beverages, and cosmetic products that include cannabinoids, extracts, or derivatives from industrial hemp (CBD). Additionally, the bill would also allow non-licensees to sell foods, beverages, and cosmetics containing CBD derived from industrial hemp, so long as manufacturer demonstrates that the industrial hemp used came from a state or country that has an approved industrial hemp program. Although this will be a huge victory for the gray CA industrial hemp industry, it remains to be seen how the California Department of Public Health plans on ensuring the safety/testing of CBD used in food, beverage, and cosmetic products. Please also note, this is in direct conflict with the FDA’s position on CBD, which states that it is unlawful to add CBD to foods/supplements.

Universal Symbol on Cartridges (AB 1529, PENDING)

If passed, the bill would change a current requirement for universal symbols on marijuana vaporizer cartridges, shrinking the mandated symbol size from a half-inch by half-inch to a quarter-inch by quarter-inch.

Limited Banking in California (SB-51, PENDING)

If passed, the bill would provide for the licensure and regulation of cannabis limited charter banks and credit unions for the purpose of providing banking services to cannabis businesses. The bill would permit special purposes checks to be authorized and used for the payment of state and local fees and taxes, payment of rent on property leased by, or on behalf of, the account holder’s cannabis business, payment of vendors physically located in California, as specified, and the purchase of state and local bonds.

As always, please let us know if you have questions, or need assistance navigating.

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