California’s Falling Prices Pose Big Questions for the Industry: Week in Review

California cannabis regulators announced several proposed rule changes March 4 that will affect a broad range of industry stakeholders operating in the state-legal market.

Department of Cannabis Control (DCC) officials sent a notice to the public regarding the rulemaking process, which they anticipate could carry into the autumn months.

As part of that process, DCC officials have opened a 45-day public comment period that runs through April 19, said Angela Hill, DCC deputy director of governmental affairs.

“We will revise the regulations potentially through all those comments and feedback, and, depending on how big those changes are that we make, it will result in either another 45-day public comment period, or a 15-day [period] if those are minor changes that we incorporate,” she said during a March 3 webinar that previewed some of the proposed high-level changes, what to expect and ways for industry stakeholders to participate in the process.

Once the process is complete, DCC officials will send the proposals to the state’s Office of Administrative Law, where officials there will take at least 30 days for a review process, before approving and filing the regulations with the California Secretary of State, Hill said.

The proposed changes would directly impact industry operators connected to cultivation, distribution, manufacturing, retail, events, testing laboratories, license applications, cannabis product ingredients, and labeling, marketing and advertising.

The rules encompass two main types of changes in the proposed regulations, DCC Deputy Director of Policy and Research Christina Dempsey said during the webinar.

The first type pertains to a regulation package adopted in an emergency rulemaking process this past September, during the first 100 days of the department’s existence. (DCC was created in July 2021 by consolidating three former state cannabis authorities.)

Those emergency rules need to be adopted through the regular rulemaking process, so they don’t expire, which is done through permanently adopting them in what’s called a “certificate of compliance,” Dempsey said. Those emergency rules are still open to public comment.

And the second type of rule change pertains to a completely new set of proposals.

“In addition to those changes that we previously made, there are also additional changes that we’ve incorporated that serve to simplify, streamline and further strengthen the cannabis regulatory framework in California,” Dempsey said.

She reiterated that while a draft of the proposed rules are now available on the DCC website (as of March 4), the changes still have to go through the formal rulemaking process before becoming effective.

Dempsey highlighted some of those proposals in the webinar:

Cultivation

• Allows nurseries to designate trade samples (currently, other license types are permitted to designate trade samples)
• Allows cultivators to record the weight of a full harvest batch and enter into the state’s track-and-trace system, rather than requiring individual plant weights

Distribution

• Removes requirement to carry a printed Certificate of Analysis (COA) during transport
• Allows cannabis goods held for storage to be distributed directly from the storage premises
• Allows up to three sides of a transport vehicle to be used as walls of the secured storage that must be used inside the vehicle to hold cannabis

Manufacturing

• Removes requirement for beverages to be in opaque bottles
• Requires closed-loop systems to be identified on the premises diagram, and clarifies engineer certification requirements for the closed-loop system prior to its use

Retail

• Increases the value of cannabis goods that delivery drivers can carry, and also removes requirements that goods must be pre-ordered before they leave the retail premises
• Allows storefront retailers to continue curbside pickup beyond the end of the pandemic
• Allows consumption lounges to sell prepackaged, nonalcoholic food and beverages, if allowed by the local jurisdiction

Cannabis Events

• Allows cannabis goods/products to be displayed by all participating licensees at their booths, rather than just retail licensees
• Removes application requirement for specific retail employees to be identified prior to the event

Testing Laboratories

• Adds a new section that specifies the types of conflicts of interest that are prohibited to maintain independence of testing laboratories within the cannabis supply chain

Labeling, Marketing and Advertising

• Adds requirements for using Appellations of Origin program, specifically related to labeling of cannabis products and advertising of those goods
• Requires bulk good to be labeled with ingredients and allergens, relating to business-to-business transfers of goods to ensure final cannabis products are labeled with all ingredients they contain

Cannabis Products

• Limits ingredients that can be used in inhaled cannabis products to cannabis, cannabis concentrates, botanically derived terpenes and any ingredients that are on the FDA’s list of “inactive ingredients” for inhalation
• Prohibits products that would otherwise be classified as medical devices or over-the-counter drugs, such as nasal sprays, eye drops and inhalers

License Applications

• Simplifies license modifications by designating specific changes that would not require pre-approval from the DCC, but would only require notification

Those who wish to submit public comment can do so by emailing publiccomment@cannabis.ca.gov; mailing DCC Legal Affairs Division, 2920 Kilgore Road, Rancho Cordova, CA 95670; or through one of two public hearings scheduled for 10 a.m.-1 p.m. March 23 and April 19. The deadline to submit feedback is 5 p.m. April 19.

Tamara Colson, deputy director of legal affairs at DCC, encouraged those who wish to participate in the public comment process to identify the regulation by title and topic or section, and to be specific by sharing a suggestion or alternative.

“Often, we hear people say they don’t like what we’ve proposed, but they then don’t go on to tell us what another option would be,” she said. “That information is really important for us if we’re going to consider changing what we’ve proposed. Knowing what you think would be a better alternative, and along those lines telling us why, [will allow us to] properly evaluate your suggestion. And then if we choose to put it into the regulations, we can explain why we are doing that.”

In addition, DCC staff will not be able to engage in conversation about the proposed regulation text during the rulemaking process, the deputy directors clarified during the webinar.