Governor Newsom Signs Ten Cannabis Bills Permitting Interstate Commerce, Employment Protections and Expunging Records

On September 19, 2022, Governor Gavin Newsom signed several measures to strengthen California’s cannabis laws, expand the legal cannabis market and redress the harms of cannabis prohibition.

In a press release issued by his office, Newsom stated “For too many Californians, the promise of cannabis legalization remains out of reach. These measures build on the important strides our state has made toward this goal, but much work remains to build an equitable, safe and sustainable legal cannabis industry. I look forward to partnering with the Legislature and policymakers to fully realize cannabis legalization in communities across California.”

California Introducing Interstate Commerce

Although the Federal probation of cannabis currently possesses a roadblock to interstate commerce, SB 1326 by introduced Senator Anna Caballero (D-Merced), creates a process for California to enter into agreements with other states to allow cannabis transactions with entities outside California reliant on an official assurance that this activity would not put the state at risk of federal law enforcement action.

Protection Against Employee Mandated THC Testing

AB 2188 introduced by Assemblymember Bill Quirk (D-Hayward) protects Californians from employment discrimination based on their use of cannabis off-the-clock and away from the workplace.  This measure will also eliminate employment-based THC testing within the state. However, there are exceptions for those working certain positions, such as federal employees or construction workers.

Expunging Cannabis Convictions

AB 1706 introduced by Assemblymember Mia Bonta (D-Oakland) ensures that Californians with old cannabis-related convictions will finally have those convictions sealed.  This measure mandates the courts to process record sealing and other forms of relief for people with qualifying cannabis convictions on their records in a specific timeframe. Under the bill courts have until March 1, 2023 to seal records for eligible cases not challenged by July 1, 2020.

Making Medicinal Cannabis Easier To Acquire 

SB 1186 introduced by Senator Scott Wiener (D-San Francisco) preempts local bans on medicinal cannabis delivery, expanding patients’ access to legal, regulated cannabis products.  This measure prohibits localities from banning medical cannabis deliveries in their areas.

Greater Flexibility In Cannabis Beverage Packaging

AB 1646 introduced by Assemblymember Phillip Chen (R-Yorba Linda) authorizes cannabis beverages to be packaged in containers of any material that are clear or any color.

Allowing Cannabis Product Use For Non-human Animals

AB 1885 introduced by Assemblymember Ash Kalra (D-San Jose) authorizes cannabis products for non-human animals and protects veterinarians who prescribe cannabis recommendations for pets.

New Packaging, Labeling, Advertisement and Marketing Rules for Cannabis Vaporizers

AB 1894 introduced by Assemblymember Luz Rivas (D-Arleta) requires the advertisement and marketing of a cannabis cartridge and an integrated cannabis vaporizer to prominently display a specified message to properly dispose of a cannabis cartridge and an integrated cannabis vaporizer as hazardous waste, and would also prohibit the package, label, advertisement, and marketing from indicating that the cannabis cartridge or integrated cannabis vaporizer is disposable or implying that it may be thrown in the trash or recycling streams.

New Rules for State Temporary Cannabis Event Licenses

AB 2210 introduced by Assemblymember Bill Quirk (D-Hayward) prohibits the Department of Cannabis Control (DCC) from denying an application for a state temporary event license solely on the basis that there is a license issued pursuant to the Alcoholic Beverage Control Act for the proposed premises of the event. The bill would prohibit the Department of Alcoholic Beverage Control from taking disciplinary action against a person licensed pursuant to the Alcoholic Beverage Control Act on the basis of a state temporary event license issued by the DCC to a licensee that utilizes the same premises. The bill would require all on- and off-sale privileges of alcoholic beverages at the venue to be suspended for the day of the event until 6 a.m. on the day after the event has ended, and would prohibit all alcohol consumption on the venue premises for the day of the event, event until 6 a.m. on the day after the event has ended. The bill would also require all inventory of cannabis or cannabis products to be sold by a state temporary event license to be transported to and from the temporary event by a licensed distributor or licensed microbusiness, and would allow a state temporary event licensee, upon completion or cessation of the temporary event, to reconcile unsold inventory of cannabis or cannabis products and return it to the licensee’s retail premises.

Cannabis Insurance Providers

AB 2568 introduced by Assemblymember Ken Cooley (D-Rancho Cordova) provides that it is not a crime solely for individuals and firms to provide insurance and related services to persons licensed to engage in commercial cannabis activity.

California Cannabis Tax Fund Spending Reports

AB 2925 introduced by Assemblymember Jim Cooper (D-Elk Grove) requires the State Department of Health Care Services, on or before July 10, 2023, to provide to the Legislature a spending report of funds from the Youth Education, Prevention, Early Intervention and Treatment Account for the 2021–22 and 2022–23 fiscal years. The bill would require the department, on or before July 10, 2024, and annually thereafter, to provide that spending report for the prior fiscal year.  This program is designed to educate youth about and to prevent substance use disorders and to prevent harm from substance use.

State Of California’s Support Of The Cannabis Industry

These bills build on the Administration’s efforts to strengthen California’s cannabis legalization framework. As part of this year’s state budget, the Governor signed legislation to provide tax relief to consumers and the cannabis industry; support equity businesses; strengthen enforcement tools against illegal cannabis operators; bolster worker protections; expand access to legal retail; and protect youth, environmental and public safety programs funded by cannabis tax revenue.

To expedite policy reforms that prioritize and protect California consumers’ health and safety, the Governor has directed the California Department of Public Health to convene subject matter experts to survey current scientific research and policy mechanisms to address the growing emergence of high-potency cannabis and hemp products. The Governor has also directed the Department of Cannabis Control to further the scientific understanding of potency and its related health impacts by prioritizing the funding of research related to cannabis potency through its existing public university grants.

Developments like this contradict the basis of classification of cannabis under Federal law which makes cannabis illegal.

The Anti-Federal U.S. Climate

The Federal Controlled Substances Act (“CSA”) 21 U.S.C. § 812 classifies marijuana as a Schedule 1 substance with a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision. Although you can still face federal criminal charges for using, growing, or selling weed in a manner that is completely lawful under California law, the federal authorities in the past have pulled back from targeting individuals and businesses engaged in medical marijuana activities. This pull back came from Department of Justice (“DOJ”) Safe Harbor Guidelines issued in 2013 under what is known as the “Cole Memo”.

The Cole Memo included eight factors for prosecutors to look at in deciding whether to charge a medical marijuana business with violating the Federal law:

• Does the business allow minors to gain access to marijuana?
• Is revenue from the business funding criminal activities or gangs?
• Is the marijuana being diverted to other states?
• Is the legitimate medical marijuana business being used as a cover or pretext for the traffic of other drugs or other criminal enterprises?
• Are violence or firearms being used in the cultivation and distribution of marijuana?
• Does the business contribute to drugged driving or other adverse public health issues?
• Is marijuana being grown on public lands or in a way that jeopardizes the environment or public safety?
• Is marijuana being used on federal property?

Since 2013, these guidelines provided a level of certainty to the marijuana industry as to what point could you be crossing the line with the Federal government.  But on January 4, 2018, then Attorney General Jeff Sessions revoked the Cole Memo.  Now U.S. Attorneys in the local offices throughout the country retain broad prosecutorial discretion as to whether to prosecute cannabis businesses under federal law even though the state that these businesses operate in have legalized some form of marijuana.

What Should You Do?

Given the illegal status of cannabis under Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  Although cannabis is legal in California, that is not enough to protect you and for sure you want to take advantage of any assistance or support offered by the State. Be proactive and engage an experienced Cannabis Tax Attorney in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, Inland Empire (Ontario and Palm Springs) and other California locations protect you and maximize your net profits.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.