Last week three California Agencies issued a series of regulations governing recreational canna-business which is scheduled to launch January 1, 2018. The most controversial aspect of the regulations is what they don’t include. They don’t include limits on the number of cultivation licenses one person or entity can own or control.

For years, many in the cannabis industry have feared that big tobacco (R.J. Reynolds), big pharma (G.W. Pharmaceuticals) or big agriculture (Monsanto, Archer Daniels Midland) would swoop in and take over the cannabis industry once it was legalized and reached sufficient scale to make it profitable. Last November, California voters approved Proposition 64, the Adult Use of Marijuana Act., which required the California Department of Food and Agriculture to issue cultivation licenses for various size grows: Small (Type 2 up to 10,000 square feet), Medium (Type 3 up to one acre) and Large (Type 5 more than an acre). But Proposition 64 explicitly stated that “No Type 5 … cultivation licenses may be issued before January 1, 2023.”  Senate Bill 94, includes the same size descriptions and limitations, precluding large grows of more than an acre per premises until January 2023.

Many saw the five year waiting period for large grows as a barrier to entry that would allow the smaller local farmers to get a foothold in the legal recreational market, while discouraging and/or delaying big tobacco/pharma/agriculture since they wouldn’t be able to buy up, or convert their existing hundred-acre farms into pot plantations.

But the local cannabis industry was also hoping the recently proposed regulations would include a second barrier to entry; limits on the number of cultivation licenses any one person or entity could hold. The regulations issued last week don’t include such limitations.

Absent such limitations, local canna-businesses are concerned that big tobacco/pharma/agriculture will apply for unlimited cultivation licenses, effectively preempting the local cannabis industry just as it gets started.

In 1996, Californians passed Proposition 215, the first medical marijuana initiative in the United States.  Since then, the California Legislature has enacted various laws relating to the medical marijuana industry, but there hasn’t been a comprehensive regulatory system. Until now.

Last week three California agencies issued a tangled web of proposed regulations regarding medical marijuana. The California Department of Food and Agriculture (CDFA), the California Department of Public Health (CDPH) and the California Bureau of Medical Cannabis Regulation (BMCR) each released proposed regulations. The agencies have scheduled public hearings and are inviting public comment on the proposed regulations.

The CDFA explains: “Because regulations are intended to transition California cannabis cultivation to a legitimate industry, cultivators will be provided the opportunity to operate in compliance with state laws and regulations applicable specifically to cannabis and California business requirements in general.”

The regulations cover everything from an annual license fees ($560 to $38,350), mandatory video surveillance systems, hours of operation (6:00 a.m. to 9:00 pm.) to the maximum quantity of THC per cannabis edible serving (10 milligrams).

The CDFA regulations require that applicants and licensees waive their privacy rights in effect, agreeing to immediately turn over any requested records and allow site inspections. The CDFA further mandates a “track-and-trace” system, which will allow the agency to monitor all plants and non-manufactured cannabis products.

The BMCR regulations require that delivery employees carry no more than $3,000 worth of cannabis goods at a time and also describe the logistics for BMCR’s quality assurance testing. Bringing a new definition to the term “drug testing.”

The CDPH regulations dictate packaging and labeling requirements, as well as manufacturing practices that are “substantially similar to the [Federal] Sherman Food and Drug Act and FDA requirements.”

Altogether, the three sets of regulations total over 200 pages of pretty dense reading, but various cannabis trade groups and stake holders have already drilled down into the regulations and begun weighing in on some of the pros and cons. It will  be interesting to see what kind of feedback the agencies receive and to what extent the agencies are willing to listen and actually make significant changes to the proposed regulations.

In November, Californians passed Proposition 64, allowing for recreational marijuana use. The state will begin issuing cultivation and dispensary licenses in January 2018. In January Governor Brown proposed a Budget Trailer Bill, seeking to “preserve the integrity and separation of the medicinal and adult use industry by maintaining these as two separate categories of license types with the same regulatory requirements for each.”

Many believe the recently proposed medical marijuana regulations will provide a blue print  for recreational marijuana regulations.