To be great at anything, you first need to master the fundamentals.  In this blog series, we will introduce you to the fundamentals of the California cannabis industry.  After this series, we will dive into more complex concepts.  However, just like becoming great at anything, the fundamentals come first.

To start, we will provide a 10,000 foot summary of the California cannabis industry and introduce you to the key roles in the industry.  Then we will dive deeper into each role in subsequent blogs so you will have a firm understanding of how the California cannabis industry functions at the end of this series.

First, here is a short timeline of the material California cannabis legislation:

• 1996 – California first legalized cannabis with the passage of Proposition 215, commonly known as the Compassionate Use Act.
• 2003 – California Senate passed Senate Bill 420, known as the Medical Marijuana Program Act.
• 2015 – California legislatures pass the California Medical Marijuana Regulation and Safety Act.
• 2016 – The Medical Marijuana Regulation and Safety Act is amended with the passage of the Medical Cannabis Regulation and Safety Act.
• 2016 – California voters pass Proposition 215, known as the Adult Use of Marijuana Act.
• 2017 – California legislatures pass the Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”). 

Under MAUCRSA, three different government agencies were provided with the authority to regulate and oversee commercial cannabis activities within the California cannabis industry.  The California Department of Public Health (“CDPH”) was authorized to regulate cannabis manufacturers.  The California Department of Food and Agriculture (“CDFA”) was authorized to regulate cannabis cultivators.  The Bureau of Cannabis Control (“BCC”) was authorized to regulate cannabis distributors, retailers, testing laboratories, and cannabis events.  Each of the aforementioned government agencies, under MAUCRSA, were required to prepare and implement regulations on their designated cannabis operations. 

Manufacturing

The manufacturing of cannabis products is regulated by the CDPH.  Under the CDPH regulations, to manufacture a cannabis product means to compound, blend, extract, infuse, or otherwise make or prepare a cannabis product.  As such, the manufacturing of cannabis products includes packaging or repackaging of cannabis products, and labeling or relabeling the packages of cannabis products, in addition to extraction and infusion activities.  The CDPH regulations do, however, provide some exemptions from the definition. 

The manufacturing of cannabis products does not include (a) the repacking of cannabis products by a distributor or retailer from a bulk shipping container where the packaging and labeling is not otherwise altered, (b) preparing pre-rolls by a licensed distributor, (c) collecting resin or kief incident to cultivation activities by a licensed cultivator, (d) processing of non-manufactured cannabis products by a licensed cultivator, or (e) the addition of cannabinoid content on the packaging label.

The CDPH offers the following license types depending on the type of manufacturing you are intending to conduct:

Type S – Conduct commercial cannabis manufacturing activities at a registered shared-use facility.

Type P – Packaging and Repackaging cannabis products or label or relabel cannabis products containers or wrappers.

Type N – Produce cannabis products other than extracts or concentrates that are produced through extraction.  Type N licensee may also conduct activities allowed under a Type P license and register and operate the licensed premise as a shared-use facility.

Type 6 – Conduct extractions using mechanical methods or nonvolatile solvents.  Type 6 licensees may also conduct infusion operations on the licensed premises and conduct activities allowed under a Type N license.

Type 7 – Conduct extractions using volatile solvents.  Type 7 licensees may also conduct activities allowed under a Type 6 license.

Cultivation

The commercial cultivation of cannabis is regulated by the CDFA.  Under the CDFA regulations, cultivation means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis.

Depending on the type of cultivation you are planning and the proposed size of your cultivation operation, the CDFA offers the following license types:

Specialty Cottage Outdoor – Outdoor cultivation site with up to 25 mature plants.

Specialty Cottage Indoor – Indoor cultivation site with 500 square feet or less of total canopy.

Specialty Cottage Mixed-Light Tier 1 & 2 – Mixed-light cultivation site with 2,500 square feet or less of total canopy.

Specialty Outdoor – Outdoor cultivation site with less than or equal to 5,000 square feet of total canopy, or up to 50 mature plants on noncontiguous plots.

Specialty Indoor – Indoor cultivation site between 501 and 5,000 square feet of total canopy.

Specialty Mixed-Light Tier 1 & 2 – Mixed-light cultivation site between 2,501 and 5,000 square feet of total canopy.

Small Outdoor – Outdoor cultivation site  between 5,001 and 10,000 square feet of total canopy.

Small Indoor – Indoor cultivation site between 5,001 and 10,000 square feet of total canopy.

Small Mixed-Light Tier 1 & 2 –   is a mixed-light cultivation site between 5,001 and 10,000 square feet of total canopy.

Medium Outdoor – Outdoor cultivation site between 10,001 square feet and one acre of total canopy

Medium Indoor – Indoor cultivation site between 10,001 and 22,000 square feet of total canopy.

Medium Mixed-Light Tier 1 & 2 – Mixed-light cultivation site between 10,001 and 22,000 square feet of total canopy.

Nursery – Allows the cultivation of clones, immature plants, seeds, and other agricultural products used specifically for the propagation of cultivation of cannabis.

Processor – Allows the trimming, drying, curing, grading, packaging, or labeling of cannabis and nonmanufactured cannabis products.

Retail/Distribution/Testing

The commercial transportation, retail sale, and testing are regulated by the BCC.  Under the BCC regulations, transportation means the physical movement of cannabis goods from one licensed premises to another licensed premises.  As such, to transport cannabis or cannabis products from one licensed entity to another, you will need a distribution license issued by the BCC.

Depending on your proposed operation and desired commercial cannabis activity, the BCC offers the following license types:

Type 8 (Testing Laboratory) – Conduct state required testing of all cannabis and cannabis products before entering into licensed retailers.

Type 9 (Storefront Retail) – Conduct sales of cannabis and cannabis products to consumers at licensed storefront property.

Type 10 (Delivery-only Retail) – Conduct sales of cannabis and cannabis products to consumers through delivery vehicles.

Type 11 (Distribution) – Conduct distribution services between licensed producers and retailers, as well as in-between producers.

Type 12 (Microbusiness) – Conduct at least three (3) of the following commercial cannabis activities: cultivation, manufacturing, distribution, and retail sale.

Type 13 (Transport Only Self-Distribution) – May transport cannabis and cannabis goods between licensed cannabis companies, except Type 13 license holders can only transport immature cannabis plants and seeds to licensed retailers.

Cannabis Event Licenses

All licensed cannabis events in California are regulated and authorized by the BCC.  In order to hold an event, you must first obtain a Cannabis Event Organizer license and then a Temporary Cannabis Event license for each event.  To receive either license type, you must apply with the BCC and each application must receive BCC approval before being issued a license. 

Local Authorization

Once you have determined what type of state license you will need for your proposed operation, you will need to locate a city or county that will allow such operation in their jurisdiction.  After locating the specific locality, you will then need to obtain authorization from that local government before applying with the applicable state licensing authority.  That local authorization typically consists of a local permit and/or business license issued by an agency within the local government.  The local permitting process varies from city to city and from county to county and we will go into greater details about that process in a later blog.  After local government authorization is issued you can then apply with the applicable state licensing authority.

As we mentioned at the beginning, this blog is meant to provide the basic foundational information that you will need to navigate the California cannabis industry.  In future blogs, we will dive deeper into each commercial cannabis activity mentioned above, provide you with additional information on how to apply for each license, and what you are allowed to do once you are issued a license.  Please follow along as we guide you through the California cannabis industry.