Jan. 1 may seem like a long time to wait for weed. But the rollout of California marijuana and its legal retail sales — which until recently seemed fated for delay — is still on target, welcomed news for an emerging market valued at $7 billion.
“It is moving in the right direction,” said Sen. Jerry Hill, D-San Mateo, who convened an informational hearing on Monday to question the state’s top pot regulator, Lori Ajax, and other state agencies about their readiness to regulate recreational and medicinal pot. “There’s been a lot of skepticism.”
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Due to recent staff losses and computer problems at the state Bureau of Medical Cannabis Regulation, there were rumors that implementation of commercialization could get delayed a year until 2019.
Moreover, it’s daunting to move an enormous illegal market into a legal, licensed and well-regulated one, regulators and industry experts agreed.
People want to do the right thing, they said. But if the rules are unclear, too onerous or expensive, many growers and distributors may opt to stay in the shadows, they cautioned..
“We need a clear set of rules … and access to capital, with an ‘on ramp’ that you can explain to your family at the Thanksgiving table,” said Daniel Conway of Truth Enterprises, an investment fund focused on the legal cannabis industry. “We shouldn’t need a team of lawyers and lobbyists to understand how to participate.”
Draft regulations will be released in April to govern everything from growing to sales, according to Ajax. If final regulations are not ready by August, as planned, the state will to issue temporary emergency rules so that licensing can start on schedule.
But not everyone will be granted a license on the long-awaited first day — Jan. 1, 2018 — of legal commercialization, she cautioned.
Instead, the state will take a phased-in approach to licensing, while it conducts education and outreach to the distant rural corners of the state, she said.
“It could be a process of years,” said Ajax, chief of the California Bureau of Medical Cannabis Regulation.
Proposition 64, approved by voters in November, promised that, by Jan. 1, 2018, a recreational smoker could stroll into a licensed store to buy a favorite strain of weed. A medical marijuana law, the Medical Cannabis Regulation and Safety Act, has the same timeline.
Until then, weed can only be “gifted,” not bought and sold.
But there are a lot of tough regulatory issues left to resolve, government and industry experts said at the Joint Oversight Hearing of the Senate Committees on Business, Professions and Economic Development, Agriculture and Health.
Some of the challenges are posed by the different structures of the two cannabis laws, which must be reconciled, said Ajax.
The two laws take different approaches to issues ranging from ownership and residency requirements to timelines and license categories.
Pot businesses must get the green light from their local authorities before the state will give them a license. But a lot of counties are holding back on their own regulations until they see what the state unveils, according to Cara Martinson of the California State Association of Counties.
One of the biggest hurdles for state regulators has been posed by the technology platform needed to issue licenses and run a “track and trace” program that follows cannabis from seed to sale, said Sen. Hill.
But he’s optimistic because regulators have moved from the troublesome BreEZe program to a software platform called Accela, designed specifically for government agencies.
Another problem is banking and taxation. Because cannabis remains illegal under federal law, businesses can’t get bank accounts or accept credit card transactions. This means that employees, landlords and state tax officials are made in cash.
“If you’re asking a grower in Humboldt to drive to San Francisco or Sacramento to comply with paying taxes, that’s not going to happen,” said Sen. Mike McGuire, a Healdsburg Democrat whose Northern California district encompasses the pot-rich Emerald Triangle.
He predicted it will take at least a decade to control the crime, illegal cultivation and environmental damage wrought by the unregulated pot industry.
“We are flying an airplane while it is still being built,” said McGuire. While optimistic that progress has been made, “we need to be realistic, open and transparent about what we’re able to achieve and what we’re not able to.”