California Cannabis Licensing and The Collective Model: How Long Will That be Going On?

California cannabis lawyers
Big changes are coming to California cannabis collectives

Pretty much every state that’s dealt with an unregulated medical cannabis program has had to face the issue of what to do when heavily regulated adult use cannabis is introduced. In pretty much all of the West Coast states, you have had medical cannabis programs for qualified patients that revolve around an opaque “collective” model whereby patients are supposed to come together to pool resources to cultivate and distribute cannabis for medical use (via a physician or health care provider recommendation) among themselves and/or their caregivers. California was the first state to allow for medical cannabis for qualified patients back in 1996 under the Compassionate Use Act, which is part of the state’s health and safety code. Using “creative” legal advice to take advantage of this Act’s multiple loopholes and ambiguities, the “collective model” in California usually involves patients joining  a “closed loop” membership system (sometimes a formal corporate entity and sometimes not) to receive their medicine allegedly from other patients in the collective who grow or make it for them. What now happens to this collective model since California’s new cannabis laws (and forthcoming regulations) do not repeal the Compassionate Use Act?

When other states have faced the issue of what to do with their old and ambiguous medical marijuana laws after having enacted new and hardcore cannabis regulatory systems, they choose to have the new hardcore regulations cover all or nearly all cannabis issues in their state. This is due mostly to a desire to get into full compliance with the 2013 Cole Memo.

Our California cannabis lawyers are often asked whether it will be worth it to abandon the collective model in favor of receiving a state license under MAUCRSA, which will take time, money, and no small amount of effort. Our answer that it will be, especially because eventually you will no choice anyway. Even though the California legislature cannot disturb the Compassionate Use Act, it has already amended and repealed key provisions of the Medical Marijuana Program Act from 2003 that provided immunity to medical cannabis collectives and this will eventually eliminate the current collective model altogether.

Following implementation of MAUCRSA, qualified patients and their caregivers may continue to operate with limited criminal immunity without a state license, so long as: (1) the patients and caregivers operate in full compliance with state law, and (2) the local government does not prohibit the activity.  See, H&S Code sections 11362.5, 11362.765, 11362.77, and 11362.7. Immunities for medical cannabis collectives (i.e., non-profit mutual benefit corporations, non-profit corporations, non-profit cooperatives, etc.), on the other hand, expire one year after the state begins issuing licenses. See, H&S Code section 11362.775(d). 

Though MAUCRSA expressly exempts qualified patients and caregivers from licensure requirements, it does not allow qualified patients, their caregivers, or cannabis businesses to conduct commercial cannabis activity without a license. So, despite the one-year grace period provided to current collectives in H&S Code section 11362.775(d), a collective that is engaging in commercial cannabis activity that exceeds the very strict qualified patient and primary caregiver limits (see below) violates MAUCRSA and is operating illegally. We are hearing far too many stories (more in our Los Angeles office than in our San Fransisco office) of so-called cannabis lawyers and cannabis consultants charging small fortunes to help their collective clients avoid extinction. We urge you not to waste your money on these schemes.

To be immune from prosecution under the Compassionate Use Act and MAUCRSA, a primary caregiver (or a collective) must operate within the following confines when acting without a state license:

  1. Cultivation, possession, storage, manufacture, transportation, donation, or provision of cannabis must be exclusively for the personal medical purposes of no more than five specified qualified patients for whom the caregiver is the primary caregiver. (B&P section 26033(b));
  2. The caregiver cannot receive remuneration for these activities other than for actual expenses, including reasonable compensation incurred for services provided to an eligible qualified patient or person with an identification card to enable that person to use cannabis under this article, or for payment for out-of-pocket expenses incurred in providing those services. (B&P section 26033(b), H&S Code section 11362.765(c));
  3. The caregiver cannot possess more than eight ounces of dried cannabis per qualified patient unless a physician’s recommendation or local guidelines allow amounts in excess of this limit. (H&S Code section 11362.77(a)-(c)); and
  4. The caregiver cannot maintain more than six mature or twelve immature cannabis plants per qualified patient unless a physician’s recommendation or local guidelines allow amounts in excess of this limit. (H&S Code section 11362.77(a)-(c)).

Additionally, collectives and caregivers still must comply with applicable local city and county laws, which are quickly changing with respect to how they deal with commercial cannabis activity so as to embrace MAUCRSA licensing standards (if there’s not a ban).

If you do not believe the above will be enough to bring the current collective model to a halt by January 1 (when California cannabis licenses begin to issue and when temporary licenses are supposed to become effective), there’s more. Commercial cannabis activity is only permitted among licensees and once a business entity or individual receives an active temporary license or a full-blown license from the state, they must immediately stop doing business with non-licensed entities (including unlicensed collectives), or they risk losing their license. See B&P section 26053(a).

Those who think they will be able to milk the current unregulated collective model for the next year or so as the state implements MAUCRSA are likely to be sorely mistaken. Like the other adult use states that came before it, California will very soon essentially wipe out the old collective model in favor of the transparency and regulation its citizens chose. Trying to hold on to the collective model after January 1, 2018, is going to be a dangerous legal mistake.