Preparing the California Cannabis Industry for Recreational Use Regulations

On November 8, 2016, California voters passed Proposition 64 – the Adult Use of Marijuana Act. This law has many effects for the use and sale of marijuana within California. While the guidelines for personal use are fairly clear within the law, cannabis business owners face greater uncertainty. Their challenge is to adapt their business model to the new forms of industry regulation.

Business experts expect California’s cannabis industry to quickly become the largest marijuana market in the country once the provisions of Proposition 64 take effect. For reference: Washington and Colorado had over one billion dollars’ worth of marijuana sales in the first half of 2017. California, by comparison, had over two billion dollars in sales of just medical marijuana in 2016, before the bill had even passed, The Hill reported. Financial experts claim that few industries offer the growth potential of legal marijuana. Yet this profitable and exciting market is also young and untested, and its regulations change almost daily. Successful cannabis businesses must adapt their business models and prepare for the coming effects of Proposition 64. 

Under Proposition 64, the State of California has until January 1, 2018 to begin issuing business licenses for the growth and distribution of recreational marijuana. No recreational cannabis may legally operate within the State of California without such a license. Unfortunately, the state has such a grandiose task in preparing for this mass licensing effort that licenses may be delayed, as The Desert Sun reported. Cannabis business owners should manage their capital, inventory and sales in a manner that prepares them for delays in licensing.

An ongoing challenge for the California cannabis industry is federal regulation of marijuana. Under federal law, marijuana is designated as a Schedule I drug – the same designation given to heroin, LSD, and peyote. There is no legal use of marijuana, and all funds derived from its sales are considered illegal money. This creates a host of challenges for cannabis business owners. Even the simple act of opening a business bank account can be a criminal activity. Furthermore, federal law enforcement policy is constantly changing, and different presidential and Department of Justice administrations take widely different approaches to enforcing federal law against businesses which are operating lawfully under state laws.

While no one can anticipate the policies and enforcement of federal law, cannabis business owners can nonetheless protect their business interests by preparing for contingencies of federal law enforcement. By consulting with a financial planner, business owners can explore options for the investment and security of sales revenue. A financial planner can also help prepare cannabis business owners to invest and plan for periods during which federal law enforcement prohibits business operations.

Getting legal advice from an attorney who specializes in cannabis law can help business owners prepare for and respond to various forms of legal liability. The Cannabis Law Group helps cannabis business owners identify and prepare for law enforcement issues before they occur. By ensuring compliance and preparing for contingencies, cannabis business owners can ensure their business is sustained through uncertain legal environments. Contact our office today to schedule your consultation with an experienced cannabis business law attorney in Los Angeles or Orange County.

The Los Angeles Cannabis Law Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

 

Additional Resources:

A “massive undertaking” as California races to regulate marijuana so legal sales can begin Jan. 1,  August 16, 2015, by Rosalie Murphy, the Desert Sun

 

More Blog Entries:

Marijuana Equipment Business is Booming, April 14, 2017, Cannabis Law Group