By Hilary Bricken, Principal at Harris Bricken
I get asked a lot of questions about what California cannabis licensees can and cannot do under the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”). California is actually business friendly once operations get going with a license– despite its many issues with the cannabis industry. For example, vertical integration is allowed. There’s no license cap, and you can apply for a license year-round. We allow for cannabis delivery apps. And California permits consumption lounges in line with local law.
So what’s next? Well, at this point California is also going to try to allow for interstate cannabis agreements, similar to what Oregon did back in 2019 under its Senate Bill 582. In California, the proposal up for discussion is SB 1326.
According to AB 1326:
MAUCRSA specifies that its provisions shall not be construed to authorize or permit a licensee to transport or distribute, or cause to be transported or distributed, cannabis or cannabis products outside the state, unless authorized by federal law. This bill would make an exception to the above-described prohibition and would authorize the Governor to enter into an agreement with another state or states authorizing medicinal or adult-use commercial cannabis activity, or both, between entities licensed under the laws of the other state or states and entities operating with a state license pursuant to MAUCRSA, provided that the commercial cannabis activities are lawful and subject to licensure under the laws of the other state or states.
Interestingly, these interstate cannabis agreements would be between states. Not licensees. Licensees would still need to engage in contracts with each other for the actual import, export, and distribution of cannabis across state borders. The governor of California would be able to enter into these interstate agreements with governors from other states so long as:
The interstate agreement between the states would require that the contracting state agree that its cannabis licensees be bound by California’s requirements around public health and safety, track and trace, testing, inspection, packaging and labeling, and adulterated and misbranded cannabis. The contracting state must also impose “restrictions upon advertising, marketing, labeling, or sale within the contracting state that meet or exceed the restrictions” in California for the same. And all California taxes apply, too. See here for more on California’s recent cannabis tax reform.
A “foreign licensee” is a cannabis licensed and based in a state other than California. A foreign licensee cannot engage in commercial cannabis activity in California “without a state license, or engage in commercial cannabis activity within a local jurisdiction without a license, permit, or other authorization issued by the local jurisdiction.” So, foreign licensees will also be plagued by California’s local control issues if they seek to do business in one of our cities or counties that allows for commercial cannabis activity.
While it would be truly amazing to have interstate cannabis movement between licensees from San Diego up to Bellingham, Washington, there’s one massive catch here. The Feds. SB 1326 really won’t do anything unless and until one of the following four events occurs:
Number four is very interesting. Basically, if the California Attorney General releases a legal opinion that interstate cannabis agreements will not put California at risk of lawsuits or arrests and prosecutions by the Feds, then these agreements will be effective. Not sure if the California A/G’s office will stick its neck out like that, but it may if the political climate is ripe.
Hilary Bricken is a partner with the law firm Husch Blackwell, where she advises clients in the cannabis, healthcare, and life sciences spaces on transactions, regulatory compliance, governance matters, and other corporate needs. Hilary may be reached at [email protected].
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