SACRAMENTO, CA- Lawmakers in California voted to pass Assembly Bill 21 this morning, a bill aimed at slowing local municipalities from placing bans on cultivating cannabis. Earlier this week, the California Senate passed the bill in an overwhelming 35 to 5 vote, sending it to the Assembly.
The bill, AB 21, won unanimously in a 65 to 0 vote this morning, according to a lobbyist on behalf of CalCann Holdings. The bill now heads to Governor Brown’s desk to sign it before it becomes a law. The governor has twelve days to sign it into law because of an urgency clause.
“Over the past several months, local governments throughout the state have been banning marijuana cultivation and dispensaries right and left,” says Aaron Herzberg, attorney and partner at CalCann Holdings. CalCann Holdings is a California-based medical marijuana holding company building a portfolio of licensed MMJ businesses and properties.
“Assuming Governor Brown chooses to sign this bill into law, cities will have the time to take a more reasonable approach to this issue and, ideally, allow licensed marijuana to be cultivated and distributed throughout the state,” adds Herzberg. “This is a vitally important piece of legislation that fixes a serious drafting error, and the sooner it can be signed into law, the better.”
The bill fixes an important mistake in the regulations that previously allowed the state to license growers operating in municipalities without written laws in place yet by March. Because of that deadline, cities were rushing to ban growers and dispensaries before they lost autonomy to regulate them. Governor Brown is expected to sign the bill into law, which would curb municipalities from shutting down cannabis businesses.
By Aaron G. Biros, Matthew A. Karnes, CPA 1 Comment
According to Matthew Karnes, founder and managing partner of GreenWave Advisors, LLC, looking toward the growth of the cannabis industry requires analysis of the changes in state and federal laws. “Eventual rescheduling or de-listing of marijuana as a federally prohibited drug, will hopefully lead to consistent and uniform national regulation and taxing authorizations that will ultimately change the structural and economic landscape of the industry,” says Karnes in an article here.
Looking at the sales trends in current legal states is a viable option to make financial projections, but much of that relies on the changing legal and political landscape of our country. According to Karnes, because it is impossible to accurately predict federal rescheduling or full legalization, investors must look at short, medium and long term trends to guide their decision making process. Cannabis Industry Journal sat down with Matthew Karnes to discuss some of the foreseeable trends.
Cannabis Industry Journal: What are some of the trends happening presently, that you can expect to continue?
Matthew Karnes: Just as states continue to pass legislation in some form of legalization measure, there is talk at the federal level of minimizing interference with state policies and removing prohibition statutes. We can see this national progression continuing until rescheduling cannabis eliminates the current obstructions that have limited industry growth.
Where states continue to roll out legislation to legalize cannabis, the rate of retail and cultivation license granting will have a large effect on the growth rates for each given state. Free market approaches as seen in Colorado and California will allow for faster growth rates than more restrictive states.
Recreational and adult use measures being introduced are notable disruptions in the medical sector that once fueled legalization. Medical research and development of strains for specific ailments is still in its early stages due to the impact of federal policy on research.
With an eye forward to eventual federal rescheduling or possible de-listing it is reasonable to assume that uniform national testing and operational standardization protocols will eventually be implemented at least as a baseline binding thread that will steadfastly assure consumers of an expectant consistency of product.
CIJ:Where do you see medium term trends taking the industry?
Matt: With more and more states legalizing cannabis in some form, we can expect the federal government to make a policy change. This will be accomplished via a DEA policy change or through congressional avenues in conjunction with federal agencies like the FDA, USDA and Department of Agriculture administering regulations.
With FDA or Department of Agriculture implementing cannabis policies, we can expect increased interest from outside the industry in research and development of cannabis-based drugs. This will lead to a medical market with more targeted medicine with precise dosing. We can expect more physicians to gain comfort in treating ailments with cannabis as well.
The recreational market will expand greatly with normalized commerce, enabling larger cultivation operations and infused products brands could grow to the national scale with interstate commerce.
CIJ: Where do you see the industry going long term?
Matt: When the cannabis industry matures down the road, we can expect multiple offshoots occurring. The recreational industry will involve local, regional and national policy much like the alcohol industry, and will likely resemble a liquor store model with individual “mom and pop” type businesses.
We anticipate that the medical market will recalibrate as more targeted products with precise dosing and efficacy are developed. At that point it will experience increased competition and consolidation. Without medical research and clinical trials, we cannot accurately project the growth of the medical sector.
Regulations involving tax revenue will most likely use a similar mechanism that states use for alcohol and tobacco taxation. Entities like state liquor control boards will oversee cannabis regulations. When that time comes, the cannabis industry will no longer be a novel idea and will become another conventional ‘consumer staple.’
It is now December of 2015 and we are one year removed from the loss at the polls of an amendment that would allow for full spectrum medical cannabis in Florida. The defeat of Amendment 2 allowed for the implementation of the Compassionate Medical Cannabis Act of 2014, albeit a rather rocky implementation, thus legalizing low THC, high CBD cannabis strains. I participated in many of the public meetings which took place and watched the different draft regulations set forth by the Florida Department of Health be debated, commented on and ultimately revised. The process underwent legal challenges and as of the publication of this, applications for five license holders were awarded.
As many might be aware, the Compassionate Medical Cannabis Act applicants were required to be nurseries continuously operating for over 30 years with a plant registration of 400, 000 plants as of the time of application. There were other relevant requirements, but the two foregoing were the most restrictive and narrowed the market of potential applicants.
Following in line with legislative means to put cannabis in the hands of a few large, Florida-centric entities, a Bill recently passed the Senate in Florida allowing for the expansion of the use of cannabis with higher THC content for patients with debilitating diseases under Florida Statute 499.0295. Presumably, the five licensees would then be authorized to expand their crop to include THC based plants and provide those to qualifying patients.
My fear all along has been that Florida would abandon the possibility of having a robust economic, yet patient-centric model not dissimilar to Colorado, Washington or Oregon, but more akin to what one might see in New York or what was narrowly avoided in Ohio. In fact, I have considered the possibility that should the new Amendment supported by United for Care passed, since that Amendment allowed for the Department of Health to promulgate the rules and regulations, that the Department could, assuming the five licensees are operational, merely give responsibility to the five licensees, allowing them to expand.
Alas, I believe, and I am happy to admit it, I may be wrong. In Florida, constitutional amendments require a review by the Office of Economic and Demographic Research. It is the focus of this body to analyze and report the economic impact that a particular amendment might have upon passage and effectuation. Data from numerous sources are reviewed and integrated into the Committee’s opinion. Of note, during my review of the October Economic Estimating Conference Meeting and Reports was the position taken by the Department of Health. Specifically, the Department of Health did not indicate that it could implement a system by merely expanding or working off of the framework it has for the Compassionate Medical Cannabis Act. Instead, the Department took the approach that a new set of regulations and guidelines, as well as departmental operations, would need to be implemented. In fact, it would need to be implemented to comply with the MMTC system authorized by the amendment. Whether one believes in the vertical model or one which licenses similar to Maryland and a few other states, the important point is that the Department of Health seemingly recognizes that a more robust model will have to be implemented.
So what does all this mean for patients and potential businesses in Florida? In regard to patients, I wish I could say that the potential for treatment through cannabis is foreseeable in the short term. However, I am not convinced of this. I do believe that the selections and process for which applications were selected under the Compassionate Medical Cannabis Act will be challenged, thus resulting in more delays. With regard to the Amendment and implementation should it pass, it will not be until the middle of 2017, approximately one and one-half years away. Should businesses begin preparations in Florida currently? In my honest opinion I believe it is hard to say. In the summer of 2014, I spent a lot of time counseling individuals and businesses on planning for the legalization of medical cannabis in Florida. Some clients were more aggressive than others and ultimately spent time and money, perhaps unnecessarily. On the flip side, I participated in the application process in Maryland and am of the belief that individuals who made application for Maryland cultivation licenses benefitted from an early start and preliminary planning.
I know a number of successful cultivators in legal states who moved on Maryland as a last minute decision once recognizing that although scored as part of an application, residency or lack thereof was not a bar to licensure. I am therefore of the opinion that certain preparation in advance is advantageous and allows alteration of the plan and adaptation at a later stage without wasting resources to accomplish much of the work that is capable of being accomplished in advance. I do believe there are a good deal of uncertainties, depending on how things move forward, as to what our model will look like and if that model will get into place, depending on the rollout of the Compassionate Medical Cannabis licenses as well as the possibility of some of the legislative initiatives catching wildfire, much as the Compassionate Medical Cannabis Act of 2014 did at the very end.
California has enjoyed legal medical marijuana for almost two decades, giving the state one of the greatest head starts in the industry. States like Colorado, Washington, and Oregon have since legalized recreational use for adults and passed legislation providing for state regulation of the industry.
For the past two decades, California’s medical marijuana market lacked strict, enforceable regulations, allowing for a black-market-mentality to remain prevalent.
However, that could all change with a 2016 ballot initiative that would legalize recreational use for adults along with more regulations for medical marijuana. I have noticed a schism developing in the cannabis industry, with some clamoring for more regulations to ensure safety and traceability, and others fearing over-regulation and big business involvement.
In the interest of advancing legalization efforts nationwide with mainstream acceptance, I think regulations that address traceability, testing, and safety are important to jettison the cannabis industry into a legitimate spotlight.
Colloquially known as the “Wolf of Weed Street”, Jason Spatafora, founder of MarijuanaStocks.com and CEO of FBEC Worldwide, Inc. believes that the marijuana market in California could be on par with the tech boom. “Previously, California’s medical marijuana laws might as well have been recreational, but as the state introduces new legislation we will see heavy expansion with companies getting into the recreational market, leading to increasing growth and production, which requires ancillary businesses to support that growth,” he says.
“It is not just the private market that will benefit, the public sector will soon be on par with Colorado when tax revenue begins to grow,” says Spatafora. “California is the most populated state in the country, [and] new legislation will really change the landscape of the cannabis market.”
Matt Karnes, founder and managing partner of GreenWave Advisors, LLC, believes that while implementation of new rules would not go into effect until 2018, the process will be facilitated by existing infrastructure expected to be established for medical marijuana. “We are conservative in our estimates for 2016 and expect that California’s legal medical marijuana market will grow 15% to approximately $2 billion from the 2015 estimate of $1.8 billion,” says Karnes.
According to Karnes’ figures, we can expect both markets to grow considerably over the next five years, leading to a $7.61 billion total marijuana industry in California by 2020.
Cultivators, manufacturers and dispensaries face a variety of ever-changing regulations that vary between states. The cannabis industry is notoriously inconsistent with regulations and as new legislation changes the rules so often, it can be difficult for businesses to keep up and stay compliant.
CannaScore provides a cannabis compliance auditing system that takes an inspector through questions around the operation, flagging areas that are out of compliance with state regulations. CannaScore works in Washington, Oregon and Colorado, and has plans to provide its services in Nevada and Maryland soon.
Various screenshots of an audit being performed with CannaScore
After co-founding DANK, a dispensary located in Colorado, Kush Bottles Colorado, a marijuana child-safe packaging company, and Denver Consulting Group, license-to-sale consulting company for the marijuana industry, Greg Gamet co-founded CannaScore after finding third party compliance audits to be lengthy, time-consuming and inefficient. The company developed the program and a mobile app within one year and beta-tested it for another six months.
“We are trying to stay in code with city and state regulations, along with the Colorado Marijuana Enforcement Division [MED], who finally has enough money to go out and enforce those laws. CannaScore identifies areas of concern and allows business owners to take corrective actions before problems ensue,” says Gamet.
The home screen of the app, CannaScore, on an iPad
According to Gamet, some of the biggest areas of concern for business owners involve making sure employees and day-to-day operations follow the extensive rules set forth by state and local governments. “The MED wants to make sure there is no hidden ownership [or] diversion of the product, and that dispensaries are following the rules, especially when it concerns public safety,” he says. “CannaScore can help businesses get a great overview on how they are operating within these rules that are enforced not only by the MED, but local police and fire departments, local health departments, and the Colorado Department of Agriculture.” The program will be available to other qualified consulting services to use through licensing agreements.
An Audit Summary Report prepared for Cannabis Investors Group
The overall score, much like a FICO or Dun and Bradstreet score, rate an individual’s or business’ credit score, which helps business owners, banks, landlords and other stakeholders know what level of compliancy a cannabis business is operating. It also keeps a compliancy record on hand if a business is required to prove to a governing body its willingness to follow the rules.
In performing dispensary, grow, infused products, and MIP kitchen audits, CannaScore can give the consulting company that is performing the audit the ability to assist in the correction of any and all violations. “Once a violation has been found, the consulting company can work with the customer to get it corrected immediately, which will increase revenues,” says Gamet.
“Because rules and regulations change so often it can be very difficult to stay on top of managing everything that goes into staying compliant,” Gamet adds. “Keeping compliant in the cannabis industry is a full time job and CannaScore can make it easy.”
As the industry grows and regulators hammer out details in legislation, compliance will remain an important part of any cannabis business. Staying in code with local laws and state regulations can make or break a business.
With an estimated 8 million to 12 million servings of edible marijuana already sold in Colorado, there is cause for concern over food safety testing, and how manufacturers will tackle challenges like regulatory compliance and quality assurance.
When Colorado made history this year by legalizing recreational marijuana use, lawmakers were tasked with creating a regulatory framework for the production, sale, and use of the previously illegal substance. While Colorado has addressed issues such as taxation and cultivation of the plant, the state has struggled to provide clear guidelines for food safety, testing, and lab certification regarding marijuana edibles, causing difficulties for regulators and manufacturers alike.
Federally, USDA and FDA are reluctant to regulate the nascent industry because marijuana is still considered a Schedule I narcotic by the DEA. The Colorado Department of Public Health and Environment is unwilling to regulate marijuana edibles out of fear of jeopardizing their federal funding.
In lieu of the Department of Public Health and Environment’s oversight, the state allows the Marijuana Enforcement Division, under the Department of Revenue, to handle food safety and lab certification. It appears this regulatory agency may be in over its head as concerns grow over potency testing and labeling in the wake of two deaths allegedly involving the overconsumption of marijuana edibles. Adding insult to injury, the Denver Department of Environmental Health cited 58 violations at 24 edible marijuana establishments this past month.
Still, with an estimated 8 million to 12 million servings of edible marijuana already sold in Colorado, there is an immediate cause for concern in food safety testing. As the edible marijuana industry grows, so do worries over how manufacturers will tackle challenges like regulatory compliance and quality assurance.
Ben Pascal, Co-Founder and Chief Business Officer of Invisible Sentinel, feels that there is a lot more the government should be doing right now. “This is a growing trend that will continue in the United States; these products will continue to gain market share and there should be some sort of guidance on how and when to regulate the safety of these products,” explains Pascal.
Invisible Sentinel’s rapid molecular diagnostics product, Veriflow, can help address some the concerns around risk in conducting testing for marijuana edibles,” says Ben Pascal.
With a rapidly growing industry, more producers of pot edibles are finding it harder to meet regulatory compliance goals. “Larger accredited labs in the US find that there is risk in conducting testing for marijuana edibles,” says Pascal. He believes that Invisible Sentinel’s rapid molecular diagnostics product,Veriflow, can help solve some of these issues.
“We make molecular testing more accessible with low cost, ease of use, robust technology, and the ability to bring all of this testing in-house, helping to eliminate risk factors for clients,” describes Pascal. While Veriflow has the capability to alleviate some quality assurance worries, Pascal points to the lack of regulatory oversight as the main issue.
“If you are not going to be regulated by the federal government, holding you to a safety standard, then smaller groups will not make the proper investments to ensure the safety of their product,” Pascal explains. “It is not about cost, it is about the lack of education and knowledge surrounding the implications of food safety issues in this industry.”
After some of these smaller regulatory hurdles are cleared within the state, then we can start to look toward future food safety standards in the marijuana edibles industry on a national level. Colorado’s experiment in legalization foreshadows some of the issues we will face when marijuana is accepted at a federal level.
As this trend continues, we should act preemptively to alleviate regulatory headaches before they are exacerbated, Pascal adds. The nation’s agencies need to be ready to embrace the legalization of marijuana and related food products in order to prevent real safety issues from surfacing.
This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.
Strictly Necessary Cookies
Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.
We use tracking pixels that set your arrival time at our website, this is used as part of our anti-spam and security measures. Disabling this tracking pixel would disable some of our security measures, and is therefore considered necessary for the safe operation of the website. This tracking pixel is cleared from your system when you delete files in your history.
We also use cookies to store your preferences regarding the setting of 3rd Party Cookies.
If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.
