California Works to Set up a Regulatory Framework to Build a $7 Billion Legal Marijuana Industry

Government workers in Sacramento are posed with the challenging task of crafting regulations and rules for California’s new legal marijuana market, the Associated Press reports. New medical cannabis laws passed in 2015 and the recreational legalization measure passed by 57% of voters in November established similar overarching regulatory frameworks. The Bureau of Medical Cannabis Regulation is tasked will developing rules to best implement the new laws for a market that is projected to be worth $7 billion and pull in $1 billion every year in taxes.

Heading up the team of 11 full-time government workers is chief of the bureau, Lori Ajaz. The team, working from cubicles inside Sacramento’s retired basketball arena, has until next year to establish the guidelines that will govern the state’s blossoming legal marijuana market.

“We’re small but mighty,” Ajax told the Associated Press, in reference of her staff.

The goal is to create a singular regulatory framework that manages both the recreational and medical cannabis markets. Gov. Jerry Brown recently proposed that California spend more than $50 million to set up the programs that will issue licenses and collect taxes, and pay for the employees that will regulate the industry.

California’s recreational marijuana law takes effect on January 1, 2018. By then, Ajax and her team will have had to develop a coherent system capable of both accounting for a medical marijuana system that has spent the last 20-years operating under its own rules, as well as transitioning the state’s robust black market into the legal licensed one. It’s no small challenge.

“It’s going to take us 10 years to dig out of the mess we are in,” said Democrat state Sen. Mike McGuire, regarding the state’s somewhat disorderly market. California is “building the airplane while it’s being flown.”

Tens of thousands of individuals and businesses will need licensing, the Associated Press reports. Under the new law, there will be nearly 20 different types of licenses. Farmers, distributors, producers, testing labs, dispensary operators and delivery services will all need to obtain the appropriate permits.

The new law also calls for a computerized system to track cannabis from “seed to sale.” Scanners will be used to monitor cannabis from cultivation through its sale at a retail store or dispensary. McGuire doesn’t believe it’s likely that the state will get such a project up and running by the time legal sales begin next year.

If the state gets it wrong, the black market will likely continue to boom, undercutting the industry’s economic advantages for the state.

Aaron Herzberg, partner at medical marijuana license and real estate holding company CalCann Holdings, told the Associated Press that he doesn’t believe Ajax’s team has enough time to establish an effective regulatory system by January.

“You are always going to have a black market,” Herzberg told the Associated Press. In order to make the legal market succeed, “you have to reduce the black market to tolerable levels.”

The Bureau of Medical Cannabis Regulation announced that for the next month it is accepting applications from individuals from the cannabis industry, labor unions, public health and state and local agencies, interested in participating on a marijuana advisory committee that will help inform the agency as it sets up the industry’s rules and regulations. Members of the advisory committee, selected by Director of Consumer Affairs Awet Kidane, will work with the marijuana bureau, food and agriculture and public health departments to help develop the regulations.

You can read the entire report from Associated Press here.

Trafficroots Analysis Pixel