California has been hailed with potential to rein as the world’s largest regulated marijuana market on the planet, but currently trails in per-capita sales when compared with other recreational markets across the United States. Much of this can be attributed to California’s rampant illicit cannabis market, and further compounded by the state’s stringent regulation requirements for lawful cannabis businesses.
Three separate law suits have been filed, alleging that a Californian-based marijuana company and its key executive defrauded $1.2 million in loans from investors.
The suits allege that Case Mandel and his Cannadips business operations, used fictional projections — inflated by as much as 2,000 percent — to deliberately mislead lenders into investing in his cannabis companies, then Mandel supposedly held the funds without ever intending to repay them.
Regulations were proposed by the California Department of Food and Agriculture (CDFA) last month, suggesting that appellations of origin are established for cannabis. As such, February 20 marked the beginning of the 45-day period required by Californian law, where the public can submit any comments it may have on the matter. The CDFA has continued to welcome and encourage all interested to submit their thoughts. The deadline to do so is April 6, 2020.
Under Section 26063 of the Business and Professions Code, The Medical and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), requires that the CDFA Cultivation Licensing Division, also known as CalCannabis:
- Forms standards that allow licensed cannabis growers to elect a county of origin for their cannabis; and
- Establishes a process that licensed cannabis growers can use to establish appellations.
The department has until January 1, 2021 to form the process of appellations of origin. In order to meet this statutory obligation and to fulfill MAUCRSA mandated responsibilities, the department has created what is now know as, the Cannabis Appellations Program (CAP).
As of March 1, 2020, California has allowed qualified medical marijuana patients and primary caregivers to receive free cannabis, donated by retailers. This welcomed update arose after the passing of Senate Bill 34, which is also responsible for exempting donated cannabis items from cultivation, sales and use, and excise taxes.
The bill states licensed growers, distributors, manufacturers, retailers and micro-businesses may allocate any already available inventory of cannabis and related marijuana products, for donation. Products set aside for donation can only be given by licensed retailers either directly to a medical patient, or to their primary caregiver.
Arroyo Verde farm, owned by Barry Brand in Carpinteria, was considered a prime example of how a legal cannabis business could flourish under close regulation from Santa Barbara County. Then in January, a sheriff-led raid of the farm found evidence to suggest the farm was not only selling licensed products, but also selling products on the illicit market too.
This came as a surprise to some. Barry Brand had a reputation among county officials and industry investors as an honest businessman.
He was so well trusted by officials, that when a licensed cultivator property tour was given by the county to show reporters just how well cannabis regulations were going, Brand’s farm was chosen. Ironically, the tour intended, among other things, to demonstrate just how impossible it would be for a grower to siphon off crop to sell on the illicit market.
For 22 years, medical marijuana was the only kind of legal cannabis sold in California, until the state went on to legalize recreational cannabis in 2018. Within the months immediately following that addition, a number of medical marijuana dispensaries shifted away from leaving pot out on counters for customers to view and smell, to exclusively stocking pre-packed cannabis in already sealed bags. Prices went through the roof, welcome deals for new customers dried up, and hiked taxes raised product prices even more.
While other dispensaries carried on with business as they always had done. They kept buds out and available for close-up inspection before being weighed, and a complimentary joint was often handed out to welcome first time purchasers. But if you shop at a dispensary of this kind today, chances are it’s an unregulated, illegal shop. Continue reading
California’s cannabis industry is sitting on a not-so-well kept secret — that many of its licensed, above board, legal business operators have also traded unlawfully, at some point, and to one extent or another.
As many industry insiders have echoed, anyone turning a profit in this new era, has to have at least one hand in unregulated dealings. Chris Coulombre, CEO of Pacific Expeditors in Sonoma, has said “I have to imagine that 60 percent of the market overall is probably playing in a parallel markets, but I don’t think they enjoy that. It’s truly a decision of necessity.”
Whispers of retailers selling counterfeit products are rife. Cultivators are known to sell unregulated product on the side. But how can we blame them? Suffering terribly at the hands of price undercutting from illegal competitors, these unregulated exchanges are all taking place in hopes of keeping doors open, and businesses afloat. Continue reading
Ever since California legalized marijuana, state government job applicants have found cannabis use to be a major hurdle in gaining employment. Too often, legal cannabis is the reason candidates are deemed ineligible for government agency jobs.
With a sharp rise in the number of public and private sector job seekers disqualified for testing positive for marijuana use, calls have been made to update legislation. Insiders are asking whether rules of employment should now be relaxed, given marijuana use is far more widely accepted today, than it was prior to its legalization.
Marijuana companies are actively working to update their websites, business practices and internal policies in preparation for new directives under the California Consumer Privacy Act.
As Los Angeles marijuana business attorneys can explain, many cannabis companies don’t even fall under the jurisdiction of the landmark act. Still, they are motivated not only by a desire to prove their desire to be in compliance just like any other company. Plus, it’s something most of their customers want.
Most California marijuana businesses are facing enough legal scrutiny as it is. Although the new law applies only to those corporations that generate at least $25 million a year in revenue and glean data on 50,000 or more households, devices or residents, some believe it’s better to make a good faith effort than to skate on the excuse that they aren’t technically beholden to it. It’s a potential marketing opportunity as well as a way to show regulators they are working to be responsible business partners. Continue reading
The black market bud sales are the bane of legitimate marijuana businesses throughout California. There are billions of dollars to be gleaned in the shadows of licensed, regulated industry. However, it’s getting increasingly expensive to operate on the fringes, and officials say that is precisely the point.
Now, a new proposed law targets not just the illicit marijuana operations themselves, but the companies doing business with them. A new bill, if passed, would impose $30,000 in fines for every single offense of aiding and abetting unlawful commercial cannabis activity in California. That would include advertising for these ventures as well as providing leases to them. That would put significant pressure on landlords and advertising companies that try to make a profit off the virulent black market. Penalties would be paid to the state’s general fund.
As our Los Angeles marijuana business attorneys can explain, existing law imposes triple the amount of a state license fee for any individual or entity caught engaging in commercial cannabis business activity that is not licensed. That figure may be adjusted depending on the company’s annual revenue. Continue reading