With a new set of proposed regulations issued by the California Bureau of Cannabis Control (“BCC”), comes new issues to address. This blog post will cover what I consider the three most interesting changes, additions, and/or edits to the proposed regulations. This post will also list a few “honorable mentions” towards the end.
Who is Considered an Owner?
The BCC proposes to expand on its original definition of “owner” to include non-plant touching people/entities. Section 5003 of the regulations defines who is considered an owner. More specifically, Section 5003(b)(6)(D) originally read as follows “Any individual who assumes responsibility for the license.” The BCC has proposed new language for § 5003(b)(6)(D) to read as follows:
Any individual who assumes responsibility for the license. Such an individual includes but is not limited to, the following:
(i) An individual who is managing or directing the commercial cannabis business in exchange for a portion of the profits.
(ii) An individual who assumes responsibilities for debts of the commercial cannabis business.
(iii) An individual who is determining how a portion of the cannabis business is run, including non-plant touching portions of the commercial cannabis business such as branding and marking.
(iv) An individual who is determining who cannabis goods the commercial cannabis business will cultivate, manufacture, distribute, purchase, or sale.
So, what does this mean exactly? Well, this means that A LOT more people could be considered owners. If your cannabis company contracts with a marketing company that marketing company could now be considered an “owner”, and that must be disclosed to the BCC. If your company bought the formula for edibles from another and that person/entity does not have anything do with the manufacturing, but is paid a royalty which is a form of split profits, it would be considered an owner if the proposed regulations are adopted.
Cannabis and Alcohol
We have all seen the advertisements or promotions for “cannabis wine” or “cannabis beer” or something similar. All of us also know that mixing cannabis and any alcohol is not allowed under the regulations. The BCC has proposed an addition to the regulations to cut down on the marketing of cannabis infused alcohol. Section 5040.1 Marketing Cannabis Goods as Alcoholic Products states:
Licensees shall not sell or transport cannabis goods that are labeled as beer, wine, liquor, spirits, or any other term that may create misleading impression that the product is an alcoholic beverage as defined in Division 9 of the Business and Professions Code.
This means that any licensed cannabis business cannot sell a product that advertises or markets as a cannabis based alcoholic beverage. It seems as if the proposed regulation is to protect consumers from believing that they are consuming cannabis infused alcohol. So, the “cannabis wine” and the “cannabis beer” we have seen will no longer be able to be sold.
As we know, advertising in the cannabis industry is restricted. However, what seems to not be known is that giveaways are not allowed under the BCC’s emergency regulations. Many companies still advertise free product or giveaways in clear violation of the emergency regulations. In fact, I am writing this on Halloween night and I saw no less than three Instagram posts, which fall under digital communication, advertising BOGO products.
Anyways, the proposed regulations go one step further and state, “Shall not advertise free cannabis goods or giveaways of any type of products, including non-cannabis products.” Did you catch the difference? It is subtle, but it is major. If you’ve read the regulations you know I took out the underlined portion. Come on, it makes it more fun. The new proposed language is “including non-cannabis products.” One can assume this means no free hats, pens, lighters, grinders, rolling papers, etc. So, if this language is adopted, say goodbye to giveaways that do not involve cannabis goods. Psst, the giveaways with cannabis goods should already be gone according to the emergency regulations released in 2017.
The three sections mentioned next are honorable mentions in my view. This does not mean the proposals are not major changes or anything of the sort, more so that the topics are less sexy if you will, than the topics mentioned above. Anyways here are the honorable mentions:
(a) Section 5303 regarding packaging includes a number of additions including the term “rolling;
(b) Section 5055 “Cannabis Waste Management” is proposed to be struck completely and Section 5054 “Destruction of Cannabis Goods Prior to Disposal” is a proposed addition; and
(c) Last but not least, on pages 20-24 the annual license fee schedule has major proposed changes.
Once again, these topics are not any less important, but I found the other topics more interesting to discuss.
The BCC has issued another set of proposed regulations. Remember if you do not like the proposed text there is a 15-day public commenting period. The regulations were released on October 19, so the 15-days is set to expire on Monday, November 5, 2018 at 5 p.m. If you want to file a comment, then you must act fast.
All information provided in this article is for educational purposes only, and does not constitute legal advice. Each situation is dependent on the specific facts and must be evaluated on a case-by-case basis. If you’d like to discuss the specifics of your situation, please call our office at (213) 784-3640