Next month could be big for California’s cannabis industry.
Among legislation introduced last session by state lawmakers was a bill to enable hemp-infused food and beverages to be legally sold by licensed marijuana retailers, and a bill that would enable a limited banking system in California for cannabis companies.
Legislators went on summer break earlier this month, and are set to return Aug. 12. When come back, they have only until mid-September to pass bills and send them to the governor.
There were 49 cannabis-related bills introduced this session, and 28 of those are still alive. These bills deal with topics including driving under the influence of marijuana, hemp clean-up legislation, how cannabis tax funds should allocated, the narcotics registry and the underground economy.
A number of the bills could materially impact the cannabis industry and change the way in which the industry is regulated, according to Amy Jenkins, senior policy adviser for the California Cannabis Industry Association. The CCIA is an advocacy group representing more than 500 California businesses.
“It’s pretty substantial,” Jenkins said, referring to both the number and scope of this year’s legislation.
One bill that’s getting some buzz is Assembly Bill 228. While the state currently allows the manufacturing and sale of cannabis, the use of industrial hemp as the source of cannabidiol to be added to food products is prohibited, according to the California Department of Public Health.
The department made it known last year that the use of industrial hemp-derived CBD oil or CBD products is prohibited in food because under U.S. Food and Drug Administration rules, CBD and CBD oil are prohibited as food additives.
The department was interpreting current state law, which prohibits the manufacture and sale of “adulterated foods, beverages, or cosmetics.”
An adulterated product is considered to contain any poisonous or deleterious substance. Industrial hemp by most state definitions has less than .03 percent tetrahydrocannabinol. THC is the chemical responsible for most of marijuana’s psychological effects.
“Technically speaking, it is not legal to sell these products in California,” Jenkins said.
While the Department of Health’s interpretation of the law hasn’t stopped some businesses from selling CDB-infused products, the removal of this regulatory hurdle could clear the way for more products to be sold and offer legal protection to those already in the CBD-infused business.
AB 228, introduced by Assemblywoman Cecilia Aguiar-Curry, D-Winters, would prohibit restrictions on the sale of food, beverages, or cosmetics that include industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp.
The bill’s language reads: “This bill would state that a food, beverage, or cosmetic is not adulterated by the inclusion of industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp, and would prohibit restrictions on the sale of food, beverages, or cosmetics that include industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp based solely on the inclusion of industrial hemp or cannabinoids, extracts, or derivatives from industrial hemp.”
AB 228 would take effect immediately as an urgency statute if it’s passes. The bill, which is waiting for a hearing in the Senate Appropriations Committee, has passed through two previous committees unopposed.
A coalition of businesses and interested parties representing the hemp and cannabis industries has been meeting with the governor’s administration and regulators about the bill to discuss how the law would be rolled out and the new regulations would be implemented.
“There is some concern among the Department of Public Health and the Bureau of Cannabis Control about implementing this bill, and so we’re trying to resolve some of those concerns right now,” Jenkins said.
Banking has been another murky matter in the cannabis industry.
Senate Bill 51, introduced by state Sen. Majority Leader Robert Hertzberg, D-Van Nuys, would establish a new banking system in California for cannabis operators by providing a license structure and regulations for cannabis limited charter banks and credit unions.
Despite its legal status in California, the federal classification of marijuana as a Schedule I drug prohibits cannabis-related businesses from depositing income with federally insured financial institutions.
SB 51 would create the Cannabis Limited Charter Banking and Credit Union Law to be administered by the Commissioner of Business Oversight and the Department of Business Oversight. It would also create the Cannabis Limited Charter Bank and Credit Union Advisory Board made up of members including the state treasurer, controller and the chief of the Bureau of Cannabis Control.
The bill, which is awaiting a hearing in the Assembly Appropriations Committee hearing, passed through several committees relatively unopposed. SB 51 would take effect immediately as an urgency statute if passed.
While some cannabis businesses have found ways to open bank accounts, many are often required to close them out when bank personnel realize they are dealing with a cannabis business, according to Jenkins.
They must spend the funds or take a check from the bank as a withdrawal.
“But then what do they do with that check?” Jenkins said. “By and large, the vast majority of the industry is excluded from any meaningful banking.”
SB 51 would also authorize a cannabis limited charter bank or credit union to issue to account holders special purpose checks valid for specified purposes, as well as authorize a cannabis limited charter bank or credit union to cash the checks it has issued.
The bill would permit these checks to be used for the payment of state and local fees and taxes, payment of rent on property leased by or payment of vendors in California.
Most importantly, perhaps, it would require a cannabis limited charter bank or credit union to obtain and maintain insurance.
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