California Cannabis Update: DCC Proposes New Rules

In a previous blog, we discussed Assembly Bill 141 and its effect on cannabis growers and distributors in California. Since then, the newly formed Department of Cannabis Control has released new industry rules that go into effect by October 1, 2021. Here’s what you should know.

AB 141 Recap

Assembly Bill 141 was introduced in July of 2021, and it included many proposals for regulatory changes in the cannabis industry. More importantly, it established the consolidation of the Bureau of Cannabis Control, Cannabis Manufacturing, and CalCannabis into one agency: the Department of Cannabis Control (DCC).

The DCC’s purpose is streamlining regulatory practices among growers and distributors. Since the emergence of the California marijuana industry, lawmakers have struggled to reign in the rapidly developing sector and establish order.

Permits, licenses, and other documents necessary for business operations are complicated, and many growers don’t have time to sift through the legal jargon. On top of that, the rules regarding permits and licensing have been altered and restructured to account for industry growth. As a result, cannabis business owners have often been left in limbo between legality and profit.

The consolidation of all the cannabis regulation agencies could fix these issues by providing consistency and structure. Now that the DCC is in charge, new regulations are about to go into effect that could change how marijuana is grown, bought, and sold.

Trade-Sample Sharing

The proposed rules include new guidelines for trade sample-sharing between cannabis businesses. Essentially, the new rule will give manufacturers, distributors, and cultivators exclusive rights to share their goods as trade samples within the track-and-trace system. This will allow them to market to more consumers and possibly make more money.

On the other hand, labs, retailers, event organizers, and transport-only distributors will not be allowed to offer trade samples. They can, however, receive trade samples from the groups mentioned in the previous paragraph.

This rule aims to allow small businesses to flourish and connect with business partners within the industry. This helps the business owners and the consumers get to buy from locals.

Definitions

Another section of the DCC’s proposal includes more narrow definitions of industry terms for company owners and stakeholders.

For example, cannabis companies will be required to identify any financial interest holders who own a stake in the company or provide financial support. Additionally, those applying for licenses will need to provide clear outlines of the financial interest holder’s responsibilities within the company.

This will help streamline company structure and compliance procedures. The DCC will know who is responsible for decision-making and leadership within the business while ensuring that new business owners understand the level of responsibility associated with ownership.

Branded Merchandise

Last but certainly not least, non-vertically integrated companies will be able to sell branded merchandise from approved businesses. This means that retailers will have the freedom to sell their own merchandise and other licensed merch as well. In doing so, non-vertically integrated companies will have the opportunity to diversify their sales.

Takeaway

So far, the DCC is working hard to establish order within the cannabis industry in California and allow licensed businesses to grow and flourish. There will be an interim period where the public can comment on the proposal before it goes into effect.

Purdy & Bailey, LLP will continue to stay updated on new DCC regulations for cannabis businesses.

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