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California lawmakers approved several cannabis bills during their recently concluded session, including legislation to help social equity entrepreneurs and consumption lounge operators – plus a measure to impose major limits on labeling.
Gov. Gavin Newsom has until midnight Oct. 14 to sign or veto any bill.
Dozens of marijuana-related bills were introduced during the legislative session, including one to protect mainstream employees who consume cannabis.
“There were the usual 40 or 50 bills that we were tracking or lobbying on or both,” Ellen Komp, deputy director of California NORML, told MJBizDaily.
Meanwhile, tax relief that the industry has demanded for years again failed to gain traction.
The three bills targeting social equity, consumption lounges and labeling are attracting particularly strong attention from California marijuana industry executives.
The industry backs the first two and vehemently opposes the labeling restrictions.
Industry insiders expect Newsom to sign the social equity and consumption venue bills, and they hope enough opposition builds to quash the packaging curbs – or at least ease the mandates.
Below is a closer look at each of the bills:
Senate Bill 51
Social equity applicants, licensees and advocates hope Senate Bill 51 will right some historical wrongs by providing social equity operators more time to get their businesses up and running.
The legislation, sponsored by prominent Los Angeles Democrat and marijuana advocate Sen. Steven Brandford, would extend the Department of Cannabis Control’s provisional-license program and allow retail equity applicants or licensees to obtain or renew provisional licenses for up to five years under certain conditions.
Provisional licenses essentially provide a path for businesses to continue operations and maintain state compliance while they apply for permanent annual permits.
The state closed its provisional license application window in March and issued its last batch of provisional licenses in June.
The run-up in the past year or so fueled hundreds of late-inning applications throughout California.
Thousands of California marijuana businesses are still awaiting annual licenses, some mired for years in the state’s dual local and state licensing requirement.
The state has 4,643 active provisional licenses, the Department of Cannabis Control confirmed.
The difficulty of transitioning to annual state licenses is particularly prevalent in Los Angeles, home to hundreds of social equity marijuana businesses.
The city has issued more than 400 social equity businesses licenses, including more than 80 for retail.
Yet only a handful of social equity retailers are operational today, as capital shortages and securing approved real estate remain perennial challenges in one of the nation’s most expensive commercial rental markets.
“Failure to sign this crucial legislation would deal a devastating blow to California’s cannabis equity program, particularly in Los Angeles County,” said Kika Keith, a Black social equity applicant and licensee who spent years and hundreds of thousands of dollars to open Gorilla X Wellness in South L.A.
“The removal of provisional licenses would effectively erect barriers that deter Black and brown retail operators from entering the legal cannabis industry, allowing corporate giants to maintain their market stranglehold.”
The bill would bring potential relief to more than 300 social equity applicants throughout the state, including operators in Long Beach, San Diego and San Jose.
Assembly Bill 374
Marijuana retailers have been asking for a legislative win for years, and Assembly Bill 374 might fit the bill.
The proposal by Assembly Member Matt Haney of San Francisco would allow California marijuana stores to operate traditional kitchens and host events on their premises.
The legislation would usher in major operational changes and potential new revenue streams while serving as a template for other states that have struggled to establish consumption lounges.
It would also remove some of the state’s biggest restrictions on consumption lounges, namely allowing operators to serve prepared foods and beverages as well as host music events.
Some operators such as Malcolm Joshua Weitz, founder of Mirage Medicinal in San Francisco’s South of Market (SoMa) neighborhood, have been stuck in a holding pattern for years, awaiting city approvals.
Weitz developed a marijuana cafe concept with DJs, a cannabinoid cocktail bar and munchies.
“It was my dream when Prop 64 passed to make a vibed-out cannabis retail cafe happen in the SoMa, a rising neighborhood in the city I was born and raised in,” he told MJBizDaily via email.
The law would go into effect Jan. 1, 2024, assuming the governor signs the bill.
Allowances, however, would be applied only in jurisdictions that allow consumption lounges, a potential obstacle in many cities and counties.
Assembly Bill 1207
It’s not easy to find consensus in California’s diverse marijuana industry, but nearly every operator and advocacy organization is opposed to AB 1207.
The legislation, sponsored by Democratic Assembly Member Jacqui Irwin, would add several new product labeling and packaging restrictions, including banning images of:
- Cartoons, toys or robots.
- Real or fictional humans.
- Fictional animals or creatures.
- Fruits or vegetables, “except when used to accurately describe ingredients or flavorings.”
Other potential violations include images, characters or phrases “popularly used to advertise to children” and “anything else” that state regulators determine might appeal to someone younger than 21.
The legislation, according to industry experts, carries short- and long-term implications for manufacturers and brands, particularly smaller and minority-led businesses since many use packaging designs and branding that highlight their origin stories and likenesses.
And its effective date of Jan. 1 also brings operational challenges.
“Affected operators would not only have to revamp packaging and marketing plans, including social media, but also could be left with copious amounts of non-compliant inventory,” Allan Bach, an attorney at Arizona law firm Bianchi & Brandt, told MJBizDaily via email.
“The new constraints limit the ability for smaller-scale operators to express and distinguish themselves.”
It could also reduce operators’ ability to compete, he added.
The impact of AB 1207 appears to reduce the viability of certain operator’s ability to successfully compete.”
The legislation would likely prohibit Death Row Cannabis from using its logo featuring a hooded prisoner in an electric chair smoking a joint, a riff on Death Row Records iconic imagery.
“These newly proposed regulations are coming at a time where all the investment into brand-building and marketing will have been for naught,” Death Row Cannabis CEO Tiffany Chin told MJBizDaily.
“If this is implemented, it will result in crippling smaller businesses and all brands in the space.”
AB 1207 easily passed both chambers of the state Legislature and awaits Newsom’s signature to become law.
Irwin, who represents Thousands Oaks in Ventura County, has written other anti-industry bills, including a law that prohibits marijuana ads on any interstate or state highway crossing the California border.
Another swing and miss
It appears another legislative session will end without significant marijuana tax reform, a perennial industry priority.
Senate Bill 512, a bipartisan proposal also sponsored by Sen. Bradford that would have ended California’s double taxation levied by local jurisdictions and the state, failed to make it out of committee.
“The fact that the California state Legislature was unwilling to make even this modest change, even after the state’s cannabis industry lost 30% of its workforce and is at risk of further regression, reveals a callous indifference Sacramento has to the fate of the state’s legal cannabis industry,” Hirsh Jain, founder of L.A.-based Ananda Strategy, told MJBizDaily.
Some issues could be addressed in so-called trailer bills in the coming weeks, but it appears history won’t repeat itself this year, industry insiders say.
In 2022, California lawmakers eliminated the cultivation tax in a trailer bill backed by the governor.
Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.
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