While Californians voted to legalize cannabis four years ago, lawmakers continue to debate and tweak regulations for the world’s largest legal cannabis market.
This year, COVID-19 caused legislative delays from coast to coast. Some states’ legislative sessions ended early, while lawmakers in other states were forced to shift focus to discussions about coronavirus-related bills.
Now, in the waning days of California’s legislative session, it’s becoming clear which bills still stand a chance of passage, and which ones have stalled, at least for now. The last day for each legislative chamber to pass bills is August 31. Governor Gavin Newsom has until September 30 to sign or veto those bills.
Two bills in particular could prove significant for state’s cannabis industry. Assembly Bill 1525, introduced by Assemblymember Reggie Jones-Sawyer and co-authored by Assemblymember Eduardo Garcia, would ensure that entities that conduct banking transactions—like receiving deposits, extending lines of credit, transporting cash, or funding transfers, or engaging in other activities like public accounting—would not “not commit a crime under any California law solely by virtue of the fact that the person receiving the benefit of any of those services engages in commercial cannabis activity as a licensee.”
Cannabis banking remains one of the highest barriers for the cannabis industry, if not the highest. Companies often struggle to find a bank or credit union willing to engage in activities that could put their financial institution in jeopardy with the feds. (For more context, read Cannabis Wire’s resource page on cannabis and banking.)
Jones-Sawyer, who represents the 59th Assembly District, which includes parts of South Los Angeles, told Cannabis Wire that Los Angeles is a jurisdiction among the “quickest” to embrace the legal cannabis industry, but banking hurdles remain.
“My district is home to a number of financial institutions that would love to provide financial services to cannabis businesses, but feel there is too much risk without assistance from the state. AB 1525 responds to those concerns by providing additional access to financial services for cannabis businesses in a manner that protects proprietary business information,” Jones-Sawyer told Cannabis Wire.
Jones-Sawyer said his legislative colleagues have been “immensely supportive” of the measure, indicated by the “unanimous bipartisan support” for the bill in the last two committees. The bill passed out of the Senate Banking and Financial Institutions Committee and Senate Appropriations by 7-0 vote margins. AB 1525 is scheduled to be heard on the Senate floor this week.
“We anticipate continued support for providing financial services to this industry. By allowing for cannabis banking, we not only prop up the legal cannabis industry, but we address the very real public safety concern of having businesses hold onto large amounts of cash,” Jones-Sawyer said.
Cannabis and banking concerns are shared by California Treasurer Fiona Ma, who recently told Cannabis Wire in a Q&A, “The lack of banking access is making it really difficult for not only the industry but also for our taxing agencies. It’s still very hard for our auditors to even ascertain whether people are paying the right amount of cash. And we’re depending on folks to be honest. The honesty system is what we’re depending on right now.”.
Another significant bill for the state’s cannabis industry is Senate Bill 67, sponsored by state senators Mike McGuire, Jim Wood, and Tom Lackey. If passed, the bill would create standards for appellation, city, or county of origin. This bill would “limit the approval of appellations of origin for cannabis unless it requires the practice of planting in the ground in flowering areas and excludes the practices of using artificial lighting and structures in flowering areas.” It would also “require the department to establish standards by which a licensed cultivator may designate a city or city and county of origin for cannabis produced 100% within the designated city or city and county.”
For cannabis companies trying to distinguish their products from competitors, both legal and illegal, such proof of origin lets consumers know exactly where or how their cannabis was grown. California’s cannabis appellations program is the first of its kind. And just as a wine cannot be called Champagne unless it was produced in Champagne, there will be such branding for, say, Humboldt cannabis. (Catch up on Cannabis Wire’s coverage of cannabis appellations.)
Bill sponsor Tom Lackey’s legislative director Mark Isaac Isidro told Cannabis Wire that Lackey joined Senator McGuire and Assemblyman Wood as a coauthor because “his perspective when it comes to cannabis policy is to do anything he can to fight the illicit market. Part of fighting the illicit market is to legitimize the legal, regulated market. Providing appellations of origin to cannabis products is one step towards building confidence and legitimacy in our state’s legal cannabis market by [ensuring] consumers know exactly where their product was produced.”
There are several other bills in play. Senate Bill 627, sponsored by Senator Cathleen Galgiani, would allow veterinarians to discuss and recommend medical cannabis to clients with pets who could benefit. Former Gov. Jerry Brown signed AB 2215, which protects vets from penalties just for discussing therapeutic use of medical cannabis.
“What’s happening now is pet owners are either doing research on the internet or hearing from a friend or just taking advice from people at cannabis dispensaries,” Mike Sharif, legislative director for Galgiani told Cannabis Wire last year.
Lawmakers are also considering a number of testing bills, including Assembly Bill 1470, which would clarify cannabis testing requirements, and Assembly Bill 2749, which is a quality control bill that would “establish specific testing standards for all specified compounds and contaminants” and would require regulators to post notices when cannabis testing labs are banned from issuing certificates of analysis for 45 days or longer, and again when the lab is in “good standing.” Also, Assembly Bill 1458, which focuses on edibles, would require certificates of analysis to reflect that edibles don’t exceed 10 mg of THC per serving, with a 12% margin of error until January 1, 2022, and plus or minus 10% after that date.
One bill aimed at better identifying and communicating quality control issues on the illicit market is Senate Bill 1244, which would allow licensed cannabis labs to receive samples from law enforcement and regulatory agencies so they can test those products and share the results, including, for example, any labeling inconsistencies or impurities.
A number of cannabis bills stalled this year, too, including a couple also aimed at addressing the illicit market
Assembly Bill 2094, which would have fined landlords and building managers up to $30,000 for leasing their properties to illicit market operators, has not advanced.
Assembly Bill 2122 was another stalled attempt to curb the illicit market, also through fines. Any person engaging in unlicensed commercial cannabis activity would be subject to fines three times the cost of the license for that activity for each violation, each day that the activity continues. Someone who helps someone engaged in unlicensed commercial cannabis activities could face up to $30,000 in fines, per violation, per day.
Assembly Bill 1639 stalled in July, but would have banned the sales of “artificially-flavored vapor product,” and would have also prohibited other flavorings that are “not derived from the cannabis plant or other natural botanical sources or flavors derived or synthesized from tobacco in the production of cannabis products that can be used to deliver cannabis to a person in aerosolized or vaporized form.” The bill would have allowed regulators to give citations for each violation.
Last year, e-cigarette or vaping product use-associated lung injury, or EVALI, made international headlines as public health officials and regulators raced to better understand what was causing severe lung injuries and deaths. Officials eventually zeroed in on Vitamin E acetate, a compound often used as a thickener in vape products, but the illnesses prompted hearings, and also calls for bans on synthetic product use in vape cartridges.
And, finally, while Assembly Bill 310 doesn’t explicitly mention “cannabis” or “marijuana,” the bill would, if passed, have established the California Infrastructure and Economic Development Bank (I-Bank), or in other words, a state bank, that could be utilized by members of the cannabis industry. Existing law would allow this state bank to engage in financial activities like making loans or issuing bonds.