California Cannabis: Get Your Regulatory Act Together

Whenever one of our cannabis business lawyers speaks on what the future of recreational marijuana legalization will look like in California, we usually start by directing everyone to the Cole Memo. The primary goal of any state attempting to legalize recreational marijuana should be to avoid federal intervention, and the best way to do that is to use the basic framework U.S. Deputy Attorney General James Cole provided in this memo.

Just last week, Cole spoke about California needing a strong regulatory system to govern the use and sale of marijuana. Cole was quoted as saying, “If you don’t want us prosecuting [marijuana users] in your state, then get your regulatory act together.” This should provide some serious incentive for California to get a comprehensive, well thought-out measure on the ballot to address marijuana regulation in 2016 at the latest.

In 1996, California became the first state to legalize medical marijuana by passing Proposition 215. In 2003, Governor Gray Davis signed Senate Bill 420, also known as the Medical Marijuana Protection Act, which established a medical ID card system administered by the Department of Health’s Medical Marijuana Program and allowed for the formation of patient collectives. Overall, however, this system is incomplete and fractured, leaving much of the California marijuana industry functioning in a legal gray area.

Particularly problematic is that California’s marijuana regulations vary widely from county to county and city to city, often making it difficult to determine the state of the law at any given time in any given location. If California wants to avoid federal government intervention it needs to establish a consistent, statewide regulatory system, supplanting the majority of regulatory power of counties and municipalities.

The Cole Memo contained eight major concerns of the federal government and made clear that states where these eight concerns are not adequately addressed will be targeted by the feds for intervention. Federal enforcement priorities detailed in the Cole Memo include preventing distribution to minors, preventing diversion of revenue from marijuana sales to criminal enterprises, gangs and cartels, preventing diversion of marijuana from states where it is legal under state law to other states, preventing marijuana activity that is a cover or pretext for the trafficking of other illegal drugs or other illegal activity, preventing violence and the use of firearms, preventing drugged driving, preventing grows on public lands, and preventing use and possession on federal property.

There are specific aspects of other recreational marijuana regimes that aim to address the concerns of the federal government. If you look at the regulations put in place by I-502 in Washington and Amendment 64 in Colorado, you will see that they were crafted with the guidelines from the Cole Memo in mind. For example, to prevent distribution to minors, I-502 requires that all marijuana businesses locate more than a thousand feet from certain restricted uses, like schools. There are minimum age requirements for consumption and tight advertising restrictions. To prevent revenue from going to criminal enterprises, gangs and cartels, I-502 mandates use of state-approved tracking software to track all inventory from seed to sale. The state also requires detailed financial reporting and auditing.

Going through each point of the Cole Memo, it is easy to see how both Washington and Colorado have implemented regulations to address the specific concerns of the federal government. Those eight points should provide the baseline for any marijuana regulatory framework California develops. Cole made it clear that the feds are specifically concerned with California’s lack of oversight and control over its marijuana industry. If California does not put in place an adequate regulatory framework for marijuana soon, the federal government is likely to intervene in a way that will not be good for either the recreational or the medical marijuana industry there.

Please note that one of our California licensed cannabis lawyers will be speaking at UC Irvine this Thursday about cannabis in California.