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The ABCs of Regulated California Cannabis

By Beard Bros. Crew
The ABCs of Regulated California Cannabis
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If you were to give the regulated recreational cannabis industry in California a letter grade, A through F, on how it has performed so far, what grade would you give?

Depending on what angle you view it from, the complaints and the praise may vary a bit, but overall most people agree that the prices are too damn high and the market is a fraction of what it could be if it didn’t have such a high barrier of entry for the legacy operators that blazed the trail to legalizing cannabis in the state.

At the root of that overpriced, overpackaged 8th of midzotics you just bought is a tangled web of regulation that has created its own economy of fees, fines, and never-ending missions to maintain compliance.

If you follow the Cali cannabis scene at all, you are probably already aware of the BCC, or the Bureau of Cannabis Control. Many people believe that the BCC singlehandedly manages the licensing process along with all of the other duties it takes to serve such a large state. The fact is that there are three heads to the beast, each assigned with different sectors of the state’s 10,000+ licensees to oversee.

You have got the BCC, the CDPH, and the CDFA.

Let’s take a scoop of this alphabet soup and see exactly who does what, and how their role in the process is affecting the cost and quantity of quality weed.

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BCC – Bureau of Cannabis Control

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Though they are just one of the three agencies created to regulate the state’s new taxable cannabis industry, they are considered the leader of the pack and, ultimately, it is the BCC that grants licenses to retailers/dispensaries, distributors, testing labs, microbusinesses, delivery-only companies, and temporary cannabis events.

It is also the BCC that strips them away if your check bounces or you fall out of compliance.

It may interest you to learn that the BCC was created well before the passage of Prop 64 in 2016. The Bureau and its two sister agencies were actually formed in 2015 when MCRSA (Medical Cannabis Regulation and Safety Act) was passed too little, too late.

Prop 64, known as AUMA (Adult Use Marijuana Act), essentially gobbled up MCRSA then regurgitated a conglomeration of the two called MAUCRSA, or the Medicinal and Adult‐Use Cannabis Regulation and Safety Act. This is the banner under which the taxed and regulated market operates today, and under which lay the tattered remnants of a once-world-leading medical cannabis market.

CDFA – California Department of Food & Agriculture

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CalCannabis Cultivation Licensing is the agency in charge of permitting and then policing the state’s legal growers. A division of the CDFA, CalCannabis also oversees the state’s seed-to-sale track & trace system, a digital waking nightmare known as METRC. The agency is subdivided into two branches – Licensing and Compliance/Enforcement.

The enormous costs to obtain a cultivation license from the state are so exclusionary that the California Growers Association estimated that just 1% of the state’s growers had been granted a temp license as of February 7th in 2018. Surely, that number has risen since, but not by much. The Emerald Triangle alone is estimated to have had at least 10,000 mom & pop pot farms contributing to the old Prop 215 medical market. Today, the state has just over 10,000 licensees total, counting dispensaries, manufacturers, labs, distros… all of them. The costs of compliance, zoning restrictions, environmental regulations, unsustainable tax burdens, security requirements, and draconian local control put in the hands of weed-hating city councils have crippled the state’s regulated cannabis industry quite literally at its roots and guaranteed the continued success of the unregulated market out in these streets.

CDPH – California Department of Public Health

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The MCSB (Manufactured Cannabis Safety Branch) is a division of the CDPH and is tasked with regulating all commercial cannabis manufacturing in the state.

What is cannabis manufacturing?

California breaks that down into five different types of manufacturing licenses.

  • Type P – This license type only allows for packaging and labeling compliant cannabis goods. Your Type P license only allows you to perform Type P activities, as described above.

  • Type N – This license type allows for the infusion of cannabinoids into cannabis goods. Think edibles, tinctures, etc. This also includes creating pre-rolls. If you hold a Type N license you can perform both Type N and Type P activities.

  • Type 6 – This license type allows for hash making/extraction using nonvolatile solvents, such as carbon dioxide, ethanol, water, butter/oil, or performing extraction using mechanical methods (rosin, ice water hash, etc). A Type 6 license covers Type P and Type N activities as well.

  • Type 7 – This license type is for manufacturers using volatile solvents like butane, hexane, or propane to create your favorite dabs and diamonds. A Type 7 license covers all activities/license types listed above.

  • Type S – This type of license is the lowest level of manufacturing licensure and allows for Shared Space manufacturing if the premises is already occupied by a Type 6, 7, or N licensee.

Hopeful manufacturers are asked to disclose all activities that they plan to conduct on their license application. The online license application system then determines the license type needed, based on the activities that will be conducted on that particular premises.

Again, if you are upset about the retail price of weed in Cali (and you should be) you have to realize that any business that manufactures cannabis products must hold a state license for each separate premises where manufacturing operations will be conducted. These costs add up quickly and it is inevitable that some of them get passed on in the form of higher prices as many companies struggle to survive on razor-thin margins.

KISS – Keep It Simple Sacramento

If any one of those three agencies seems like a tangled headache of red tape and fees to deal with, consider that some companies – like ours – must deal with more than one of them. More fees. More passwords. More deadlines. More rules to remember, or else. Some companies have dedicated employees just for remaining compliant – what a luxury that would be. But should that be necessary? If you think that extra salary doesn’t affect the price of your Purple Punch, you’re still not getting it.

In January of this year, just before the proverbial shit hit the COVID fan, California Governor Gavin Newsom announced his intention to merge all three regulatory agencies into one and to do so by July of 2021.

The full details have yet to emerge but from what we know so far, there are some pros and some cons to the proposal.

THE GOOD

Ideally, it would trim the fat that currently bogs the system down and trim a substantial amount of redundant fees in the process. Also, in theory, the application process should be much more streamlined, at least at the state level. All of this, if actually a result of such a merger, could lower that barrier of entry and hopefully encourage more of the smaller mom and pop and legacy growers to jump in the regulated market.

THE BAD

Change is hard. They don’t even have their heads wrapped around the laws they put in place two years ago and, frankly, neither do the rest of us. The transition period where all those kinks will need to be re-worked out will likely be painfully slow and error-filled at first. It also remains to be seen how conflicting regulations between the two agencies will be resolved. Will they lean toward leniency or get stricter?

THE MEH…

Merging the three agencies will likely lead to increased enforcement against unlicensed operators. We never like to see Blackhawk helicopters ripping through the hills in the Emerald Triangle or kicking up dust out in Anza, and you know how we feel about putting people behind bars over a plant. However, there are still some actual bad actors out there polluting public lands and extorting the environment or using cannabis to fund truly nefarious and/or violent crimes, and that is where law enforcement needs to keep their focus.

Another potential Meh… outcome from this merger could be an uptick in corporate mergers and acquisitions as the costly inter-agency walls of cross-compliance crumble. This will likely lead to an easier path to vertical integration which is not inherently a bad thing, especially if some of us old school operators can now blaze that trail more efficiently and give those corporate cucks a run for their (borrowed) money.


So, there you have it. The ABCs of California cannabis… for now, at least. We hope that this breakdown helps the average cannabis consumer understand how many layers of cost and effort and bureaucracy and bullshit there are to get legal weed from seed to sale and why, we believe, that the system written as it is was destined to Fail.

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