Authored By: Jeffrey Rosen, President

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Eight months into California Adult use, great news comes out of Sacramento on the social justice side of the Cannabis phenomena. California lawmakers passed a bill that provides a legal framework to wipe out previous marijuana convictions. The state’s Senate passed AB 1793, a bill that would force California’s Department of Justice to review the records of cannabis convictions that are eligible for “recall or dismissal of sentence, dismissal and sealing, or re-designation” under current marijuana laws.  Advocates across the country have pushed to wipe away cannabis convictions as more states begin to legalize or decriminalize the drug.  Despite the state’s relatively permissive laws, a Drug Policy Alliance study found that nearly a half million Californians were arrested on marijuana charges between 2006 and 2015. According to CNN, there are more than 218,000 convictions that could be potentially wiped out or downgraded under the new law. If Gov. Jerry Brown signs the bill into law, state officials will have until July 1, 2019, to complete a list of eligible cases  for recall. Prosecutors will have a year from that date to decide which cases they will challenge.  Thumbs up, long time coming.

Seems like weekly, we write about the issue in CA of the undocumented and unlicensed operators. California cannabis regulators have now started to demonstrate there are teeth behind the state’s new rules. Bureau of Cannabis Controls (“BCC”) spokesman Alex Traverso said “We have received hundreds of complaints to date regarding unlicensed activity,” Traverso wrote in an email to Marijuana Business Daily. “Safe to say (the Division of Investigations) is looking at more than 500 other complaints, so certainly more action (is) to come.”

The BCC in February began sending out cease-and-desist orders and recently initiated enforcement actions against a 47-year-old Orange County resident who was arrested Friday by local police for “unlawfully operating a marijuana dispensary” in Costa Mesa.  The BCC worked together with the

(1) Costa Mesa Police Department,

(2) the state Department of Consumer Affairs’ Division of Investigations’ Cannabis Enforcement Unit,

(3) the state Department of Tax and Fee Administration and

(4) the Orange County District Attorney’s office on the case, which resulted in the arrest.

Is it just me, or does it seem like four (4) agencies are necessary to “take down” one unlicensed operator, #justsaying.  Odds are high on cannabis taxes paid for the seemingly excessive operation. The man who was operating the shop in question was charged with four misdemeanor counts of unlawful transportation, sale and furnishing of marijuana. He was arraigned Monday and bail was set at $150,000. Moral of the story, in addition to documented and licensed neighbors alerting the BCC to the undocumented and unlicensed operators, you may want to also insure your own corporate survival. So, get documented and licensed.

CA has a dramatic shortage of recreational cannabis stores.  For the size of the State, relatively speaking, few dispensaries actually exist relative to the population.  MJBiz, another fan favorite, reported that the number of licensed recreational cannabis stores in California is far short of what’s needed to adequately supply the market, as licensing logjams at the local level constrain establishment of operations in large portions of the state. The issue stems from California’s dual-licensing system between state and local governments, which requires cannabis businesses to obtain local authorization from the city and/or the county in which they’ll operate before they can apply for a state license.  But only 70 of the state’s 482 cities allow adult-use retail stores, according to a database created by The Cannifornian, a news outlet covering the California marijuana industry.

According to data from the BCC, the state currently has 358 licensed recreational marijuana stores. That’s less than one store per 100,000 residents – about 15 times less than the number of adult-use stores in Oregon on a per-capita basis.  In some major population centers throughout the state, such as Fresno and Bakersfield, which have a combined population of more than 900,000 – the nearest recreational store is more than an hour’s drive away.  Along Interstate 5 between San Francisco and Los Angeles – a major stretch of highway spanning more than 350 miles – adult-use shops are nearly nonexistent.

Though it’s still very early for California’s adult use cannabis industry, more towns and municipalities will likely eventually allow adult-use stores, the state has not kept pace with other markets on the number of licensed rec shops early on.  Colorado, for example, had 242 licensed recreational marijuana stores nine months after the launch of its adult-use industry – about 4.3 per 100,000 residents, nearly five times California’s current count on a per capita basis.  Additional findings from the state licensing data include:

  • Combined, Los Angeles, San Francisco and Sacramento account for about 14% of California’s total population but are home to more than half of all adult-use stores in the state. Overall, roughly 30% of the state’s residents live in a city or town with a licensed recreational marijuana store.
  • To reach the same number of licensed adult-use stores on a per-capita basis as Colorado, California would need more than 3,700 retail locations – or more than 10 times the amount currently licensed. To match Oregon, California would require more than 5,500 recreational retail shops.
  • Four of the top 10 most-populous cities in California – Fresno, Long Beach, Bakersfield and Anaheim, which have a combined population of 1.7 million – do not have any retail marijuana stores. Long Beach, however, is slated to begin recreational sales Sept. 1st.

Warning: Pay attention: August 30, 2018 labeling Prop 65 requirements have changed.  Prop 65 primer to refresh your recollection: Prop 65 is a California voter initiative designed to protect citizens and sources of drinking water from harmful chemicals.  The State is required to maintain and publish a list of chemicals known to cause cancer, birth defects or other reproductive harm. The list now includes approximately over 1000 chemicals.  Once a chemical is listed, businesses are required to: Provide a “clear and reasonable” warning before knowingly and intentionally exposing anyone to a listed chemical.  Private attorneys may initiate a Prop 65 violation lawsuit.

This is a big deal.  Fan favorite Hillary Bricken of Canna Law blog reported on the new labeling laws which have dramatically changed what you need to say under Prop 65.  For those who package and label their cannabis and cannabis products do so pursuant to California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) and by the California Department of Food and Agriculture (CDFA) and the California Department of Public Health (CDPH). Reminds me of the joke, how many cannabis regulators does it take to… Effective June 19, 2009, marijuana smoke was added to the Prop. 65 list of chemicals known to cause cancer. OEHHA’s Carcinogen Identification Committee “determined that marijuana smoke was clearly shown, through scientifically valid testing according to generally accepted principles, to cause cancer.” Technically then, all cannabis flower is subject to Prop. 65 warnings since all flower contains/produces “marijuana smoke.” In addition, oils, wax, vapes, etc. usually contain at least one chemical on OEHHA’s list.

Given this fact, there is hardly a cannabis business in California that won’t find itself subject to Prop. 65 warning requirements at some point.

The first question cannabis businesses need to ask themselves in a Prop. 65 analysis is whether they’re subject to Prop. 65 at all. If you are over 10 employees, then you are not exempt. Otherwise, you probably are subject to it.  You then need to identify the type of warning you need based on your product(s) and the relevant chemicals. You need to be very aware that as of August 30, 2018, one must actually identify at least one triggering chemical depending on the type of harm caused by that chemical.  Previously, it was a generic Prop 65 warning. Now one must be specific about at least one carcinogen.

Specifically, OEHHA mandates that:

“If, for example, there are five possible chemical exposures from a given product, and all five chemicals are listed only as carcinogens, then the business would only be required to name one of those five chemicals in the warning. . . If there are exposures to both carcinogens and reproductive toxicants, a business would be required to name one of the chemicals that is a carcinogen and one of the chemicals that is a reproductive toxicant, but the business could choose to identify more chemicals in the warning.

In turn, your new Prop. 65 warning will look like one of the following (plus the required symbol at the beginning and to the left of the warning): For example, for carcinogens: “WARNING: This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause cancer…”  All categories require listing at least one.

Remember Prop 65 enforcement is driven by hungry (unscrupulous?) plaintiff’s attorneys who see deficiencies and, after some paperwork and time, can initiate a private attorney general Prop 65 lawsuit. Historically speaking, (think Supplements industry) the majority of money collected under Prop 65 goes to plaintiff’s attorney.  Therefore, “wake up” and do what you need to protect your business against Prop. 65 litigation.


Tailored Benefits is an employee benefits company that has had cannabis clients for over eleven years.

Jeffrey Rosen, Tailored Benefit’s founder, practiced law for ten (10) years in San Francisco, Silicon Valley & Taipei, Taiwan. He has run an employee benefits company for over twenty years. Tailored Benefits’ has evolved over the past several decades to play an integral part in the cannabis industry and specifically Employee Benefits. With the surge in demand for cannabis employees, Tailored Benefits’ specific cannabis employee benefit solutions is how you can set yourself apart, attract and retain valuable employees.

If you need more information on how to insure your cannabis business, Tailored Benefits is here to guide you and keep you informed on local and federal policies.