California completes marijuana regulatory agency merger; new cannabis czar takes over

California Gov. Gavin Newsom’s Department of Cannabis Control aims to unclog a glut of temporary licenses and transition them to annual permits as well as ease regulatory red tape and financial burdens on businesses.

That’s according to spokespeople at the newly established agency, which launched in July and amounts to one of the state’s biggest regulatory overhauls in years.

The Department of Cannabis Control (DCC), which counts nearly 400 employees, is led by Director Nicole Elliott, a Newsom confidante for more than a decade.

It also must grapple with the world’s largest illicit market.

The DCC combines the regulatory, licensing and enforcement responsibilities of three different state agencies into one large, wide-ranging regulator.

“We heard from businesses, local governments, law enforcement and others that it was complicated to work with three different state cannabis programs,” according to Christina Dempsey, the DCC’s deputy director of external affairs.

Those three agencies were:

  • The Department of Consumer Affairs’ Bureau of Cannabis Control.
  • The Department of Food and Agriculture’s CalCannabis Cultivation Licensing Division.
  • The Department of Public Health’s Manufactured Cannabis Safety Branch.

The DCC’s creation represents California’s largest regulatory reorganization since the 2013 debut of the Business, Consumer Services and Housing Agency, the department under which the DCC now falls.

The agency’s goal, according to Dempsey: Boost the number of businesses participating in the legal market, ease the licensing process for applicants and keep licensed operators compliant.

“It simplifies regulatory oversight by having one entity issuing licenses, promulgating and interpreting regulations for the entire commercial cannabis supply chain, and addressing all compliance and enforcement issues,” she added.

Moving forward, the DCC will oversee all commercial cannabis license holders in California, including cultivators, retailers, manufacturers, distributors, testing labs, microbusinesses and event organizers.

The agency also will manage the state’s track-and-trace system used to monitor cannabis flower and other products, from seed to sale, within the legal supply chain.

Newsom proposed the regulatory consolidation as part of the state’s $262 billion fiscal budget, which he signed into law July 12.

The agency was formally created through Assembly Bill 141, a so-called trailer bill that also eliminates provisional licensing in 2026 and prohibits the DCC from issuing provisional licenses after Jan. 1, 2025.

The DCC’s budget for the fiscal year is $154.3 million, nearly identical to the three former cannabis programs combined.

The overhaul is the culmination of 18 months of planning, public comment and debate involving more than 10 state agencies, various stakeholders and several assembly members.

Key personnel

Elliott, who was confirmed by the state Senate, has formally advised the governor on cannabis issues since 2019. She also served as director of the Office of Cannabis in San Francisco and held several positions under Newsom while he was mayor of that city.

Other key personnel, all appointed by Newsom, include:

  • Chief Deputy Rasha Salama, who has served at the state’s Department of Public Health since 2016, including the past five years as assistant branch chief of the Manufactured Cannabis Safety Branch.
  • General Counsel Matthew Lee, who has served as deputy legal affairs secretary in the governor’s office.
  • Deputy Director of Legal Tamara Colson, who has served as assistant chief counsel of the Bureau of Cannabis Control since 2016. She’s the only Republican appointee.
  • Deputy Director of Equity and Inclusion Eugene Hillsman, who most recently served as deputy director of the Office of Cannabis for the city and county of San Francisco.

These positions are among 26 new roles at the DCC, which is comprised of 10 divisions, including lab services, enforcement and licensing.

Provisional licenses and grant program atop agenda

The department, according to Dempsey, is unifying its processes and procedures, consolidating regulations and streamlining licensing applications to create a more consistent experience for businesses.

As of Aug. 9, California cannabis operators held 8,649 active provisional licenses, which represents more than 75% of all state licenses, according to the governor’s office. By contrast, there were only 2,834 active annual licenses, Dempsey said.

Provisional license holders and industry advocates have voiced concerns that regulators and applicants will be hard-pressed to meet the looming 2026 deadline to transition provisional licenses into annual ones.

The DCC hopes a new government relief program – perhaps the first one anywhere dedicated for cannabis businesses – will alleviate those fears.

“We are preparing to roll out the Local Assistance Grant Program, which commits $100 million in funding to assist local governments and licensees with swiftly moving from provisional licensure into annual licensure,” Dempsey said.

Though none of the $100 million has yet made it to any of the recipients, Dempsey said the agency’s goal is to “begin dispersing funds by the end of the year.”

The grants, which will be dispersed to 17 cities and counties, will provide:

  • Aid for local governments in processing substantial workloads to transition businesses into the regulated market.
  • Incentives for local governments to better align permitting methods with the state to remove barriers to licensing.
  • Resources to support the completion of environmental impact assessment and mitigation.
  • Additional assistance to support eligible jurisdictions implementing social equity programs.

A push to support local municipalities to create more pathways to the regulated market is welcomed by legal operators, who take on high capital, taxes and compliance costs while the underground market thrives.

Los Angeles-based Global Go Analytics estimates California’s illicit cannabis market generates $8 billion in annual sales, nearly double that of the legal market, which the MJBizFactbook pegged at $4.4 billion last year.

“Ultimately, we want to make it easier to participate in the legal, regulated market and less desirable to operate in the illicit market,” Dempsey said.

“We hope to create more opportunities for businesses, particularly small businesses, who want to enter the cannabis market.”


August 17, 2021 | By Chris Casacchia

Senate moves to legalize pot at federal level. What are the chances?

The Senate is preparing to wade into a controversial conversation about federal policies on marijuana after Senate Majority Leader Charles E. Schumer, a Democrat from New York, released draft legislation this month that would legalize weed at the federal level.

The draft bill, known as the Cannabis Administration and Opportunity Act, follows a similar bill that passed the Democratic-controlled House in December and comes as recent polling from the Pew Research Center shows that about 60% of Americans support legalizing marijuana for recreational and medical use.

But Senate Democrats have a lot to balance over the next several months, tasked with drafting and passing legislation on issues such as infrastructure, policing and immigration that President Biden has marked as priorities. As the draft bill jump-starts discussion on Capitol Hill, here’s a look at where marijuana legalization might go.

Weed has been fully legalized for recreational use in 18 states, starting with Colorado and Washington in 2012. A total of 37 states have approved medical marijuana. In California, cannabis has been legal for medical use since 1996 and for recreational use since late 2016.

But cannabis is still illegal under federal law, where it is classified as a Schedule I drug under the Controlled Substances Act.

Possession of marijuana remains a federal offense, punishable by up to one year in jail and a minimum fine of $1,000 for a first conviction.

Because of federal restrictions, marijuana producers and retailers face significant logistical challenges with banking, transporting goods and paying taxes, even in states where the drug is legal.

In 2019, Rep. Jerrold Nadler (D-N.Y.) and California’s then-Sen. Kamala Harris, now vice president, introduced legislation in both chambers of Congress that would have decriminalized marijuana and expunged some criminal records, among other things.

The House passed the legislation in a 228-164 vote in December 2020. It was the first time legislation to remove cannabis from the Schedule I list made it to a floor vote.

The bill ultimately failed to move out of committee in the Senate.

What does the new draft legislation do?

The bill draft is partially based on last year’s failed effort. It proposes removing federal penalties for marijuana, expunging criminal records for nonviolent offenders of federal cannabis laws, earmarking funding for restorative justice programs, establishing tax rates for cannabis products and formally allowing states to decide whether to legalize pot.

John Hudak, a senior fellow at the Brookings Institution who researches state and federal marijuana policy, said the draft legislation gives states “quite a bit of deference.”

For marijuana producers and retailers in states where recreational use is already legalized, removing federal penalties for marijuana will solve banking, taxation and transport problems, cannabis reform advocates say.

In places where weed is still illegal, state governments can opt to keep it that way.

However, without federal prohibition, pot-unfriendly states wouldn’t be able to prevent interstate transport of marijuana. Those states would also miss out on tax revenue. Marijuana advocates predict state governments could be pushed toward legalization if the federal draft bill was to be signed into law.

“While it wouldn’t tell Nebraska you have to legalize marijuana, it would say you have to allow marijuana that’s being transported from California to Ohio to be able to pass through on your interstate highway system,” said Justin Strekal, political director of the National Organization for the Reform of Marijuana Laws. “That is going to trigger a tectonic shift in thinking.”


Would the federal government stop all regulation of pot?

No, not under the current proposal.

Hudak said the draft legislation takes “a comprehensive approach” and lays out a detailed plan for oversight and regulation of recreational marijuana.

The Food and Drug Administration and the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau would regulate the production, distribution and sale of marijuana.

In an effort to address past injustices caused by federal marijuana prohibitions, the Justice Department would establish an office to help people convicted of nonviolent marijuana-related violations transition out of incarceration.


What are advocates and critics saying?

Advocates of the draft legislation see it as a rare opportunity to push federal reform on marijuana.

Still, Strekal said the draft legislation continues drug testing for federal employees and, under its proposed taxation structure, would tax medical marijuana. He hopes to see those items changed in the final version.

“Fifty years from now, the implications of the initial bill passed are going to be massive,” Strekal said. “And there’s no perfect legislation, but we want to make sure it’s as close to right as possible.”

Smart Approaches to Marijuana, an organization that supports decriminalization but opposes legalization of cannabis, released a letter from its research advisory board calling for the final legislation to include limitations on potency, advertising restrictions and a ban on flavored products that could appeal to children.

Kevin Sabet, president of the organization, said he would also like to see further discussion about whether legalization might increase the number of DUIs on the road and other public health consequences.

“There’s a lot of protections for people who use marijuana and not a lot of protections for people who don’t use marijuana, which obviously is the majority of people, believe it or not,” Sabet said.

How would federal legalization affect scientific research of cannabis?

Jennifer Bailey, a principal investigator with the University of Washington’s Social Development Research Group who has studied cannabis use, said an end to federal prohibition of marijuana would be “immensely beneficial to science.”

Research on both the harm and potential benefits of cannabis has been slim because it’s difficult for scientists to gain funding and access to marijuana.


Does legalization lead to an increase in use among children?

Researchers believe that adolescent use of cannabis has not risen in states where marijuana has been legalized. In fact, some early studies suggested it could be decreasing.

However, Bailey does see cause for concern when it comes to young children accidentally ingesting edible marijuana products, such as cookies, brownies and candy.

She said states where marijuana is legal have seen rises in accidental ingestion of cannabis by children — even in Washington, where state law bans advertising that could appeal to children.

“I mean, who doesn’t want to eat brownies,” Bailey said. “And of course, children want to eat brownies and gummy bears and large lozenges and things that look like candy.”


Will it pass?

Because the bill is still just a draft, Schumer and other lawmakers could change it substantially. But in its current form, most experts believe the bill will not pass.

Hudak called the bill “a good conversation starter.” Sabet said he is “not losing a ton of sleep over this.”

But Strekal said similar comments were made about last year’s bill having “no shot,” and it surprised many by passing the House amid the COVID-19 pandemic.

Schumer acknowledged at the draft bill’s unveiling that he does not yet have the votes to push it through the Senate. He would need total support from Democratic senators plus at least 10 Republican votes to overcome a filibuster.

If passed, it’s unclear whether Biden would sign the legislation into law. He has expressed support for decriminalizing marijuana, but not for full legalization. At a recent briefing, White House Press Secretary Jen Psaki said “nothing has changed” regarding Biden’s views on cannabis reform.