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Local Cannabis Regulation: Two Ballot Measures Up for Vote on March 7, 2017

February 14, 2017

Author: Matt S. Kiel

This article examines the two competing ballot measures regarding cannabis regulation in the City of Los Angeles up for vote on March 7, 2017. Following is a brief summary of the current regulatory framework for cannabis in California and the existing regulations in the City of Los Angeles, leading into a comparison of these pending measures.

California’s Regulatory Environment
In November 1996, California became the first state to establish a medical marijuana program (Proposition 215, or the Compassionate Use Act) allowing patients with chronic illnesses to grow and use medical marijuana. This basic program was expanded in 2003 by Senate Bill 420 (the Medical Marijuana Program Act), which established an identification card system for medical marijuana patients.

In October 2015, the state legislature enacted the Medical Cannabis Regulations and Safety Act (MCRSA), comprising Assembly Bills 266, 243 and 643 (see Cal. Bus. & Prof. Code §§19300 et seq.), which introduced a comprehensive licensing and regulatory framework for the cultivation, manufacture, transport, storage, distribution and sale of medical cannabis in California. MCRSA designates 17 license classifications and restricts the vertical integration of certain categories. To administer its provisions state-wide, the Act also instituted the Bureau of Medical Marijuana Regulation to operate within the Department of Consumer Affairs.

In November 2016, California voters passed the Adult Use of Marijuana Act (Proposition 64), a state-wide initiative that establishes an extensive system to legalize, control and regulate the cultivation, processing, manufacture, distribution, testing and sale of nonmedical marijuana for use by adults 21 years of age and older. Prop. 64 also will implement a taxation scheme for commercial growth and retail sale of cannabis once its licensing program becomes effective in January 2018. Contrary to MCRSA’s requirement that a medical marijuana business applying for state-level licensing must first obtain a local-level permit, section 26056(a) of Prop. 64 provides that a nonmedical applicant may obtain state-level licensing without showing any authorization or proof of compliance at the city or county level. Prop. 64 still empowers cities, however, to institute their own licensing systems to regulate nonmedical cannabis, and section 26200(a) provides that the existing authority of local jurisdictions shall not be limited by the provisions of Prop. 64.

Regulation in Los Angeles
In May 2013, the City of Los Angeles enacted Proposition D (the Medical Marijuana Regulation and Taxation Ordinance), which created an enforcement and regulatory structure to govern medical marijuana dispensaries within the City. This system was implemented in the absence of state-level medical cannabis regulation, as the Ordinance was enacted prior to the passage of MCRSA in 2015. Prop. D established an initial threshold for certain qualifying medical dispensaries to be granted immunity under its blanket ban on medical marijuana businesses simultaneously created by the Ordinance (which resulted in an estimated reduction to 135 medical dispensaries, down from approximately 1,600 dispensaries that existed prior to Prop. D − an estimate set forth within the text of the Ordinance). To qualify, a dispensary must have (1) been in operation since September 2007, (2) previously registered with the City’s earlier medical marijuana registration laws and (3) remained in compliance with the other operational standards outlined in the Ordinance.

Ideally, the two proposed measures on the ballot in March 2017 will allow the City to update and expand its regulatory framework to stay abreast of the comprehensive state-level regulations that have been enacted in the time since the passage of local Prop. D in 2013 – i.e., MCRSA in 2015 (regarding medical cannabis) and Proposition 64 in 2016 (regarding nonmedical cannabis).

The following table outlines the primary components of each of these competing measures (Proposition M and Initiative Ordinance N), only one of which will survive the March ballot:

Client Alert - Local Cannabis Regulation - Wilson Elser

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