Proposition 64. What Legal Pot Means for Consumers and Businesses

San Diego, California, November 10, 2016 – On November 8, 2016, the voters of California passed Proposition 64, known as the Adult Use of Marijuana Act.  What does this mean for businesses and consumers?  First and foremost, licensed businesses can start selling recreational (“nonmedical”) marijuana and any individual over 21 years of age can buy recreational marijuana without a license or prescription, commencing on January 1, 2018. Officials in California estimate it could take a year to establish necessary regulations for the growing, transporting, testing and selling of marijuana, which is why the retail laws do not go into effect until 2018.  (Interestingly, individuals in California over 21 can immediately start to grown their own marijuana and legally smoke marijuana at their private residence, presuming they can figure out how to legally obtain it.)

Consumer Perspective

Some of the highlights (no pun intended) of Proposition 64 from a consumer’s perspective:

  • Any individual over the age of 21 can possess, transport and buy up to 28.5 grams (an ounce) of marijuana for recreational use.
  • Any individual over the age of 21 can grow and use up to six marijuana plants.
  • Marijuana cannot be smoked in public places, absent a local ordinance allowing it, or in any location that tobacco smoking is banned. (Local municipalities will have the power to issue licenses to allow marijuana smoking to take place at certain marijuana retail establishments, such as a “pot cafe.”)
  • Smoking marijuana within 1,000 feet of a school, day-care center or youth center while children are present is prohibited.
  • You could be fined or arrested for smoking marijuana while driving a motor vehicle, boat or aircraft.

Business Perspective

Businesses who want to legally grow, transport, test, distribute, or sell marijuana may have to deal with, or obtain a license from, multiple governmental agencies.  The California Department of Consumer Affairs will create a Bureau of Marijuana Control, which will be tasked with creating, issuing, renewing and revoking state licenses for the transportation, storage, distribution and sale of marijuana. Marijuana growers will have to get a license from the state Department of Food and Agriculture. Those who want to form businesses to manufacture and test marijuana products would be licensed and overseen by the state Department of Public Health.  The state agencies must begin issuing licenses by January 1, 2018.  Licensed medical marijuana businesses will have the first opportunity to obtain licenses for recreational marijuana.   Anyone seeking a marijuana license of any kind will have to undergo a state background check.  Local municipalities could include additional taxes and/or licensing requirements.  (These municipalities also have the power under Proposition 64 to issue an outright ban on marijuana-related businesses in their borders.)

For the first five years after Proposition 64 takes effect, there is a ban on large scale marijuana cultivation.  (Large scale cultivation is defined as those with more than one acre of outdoor grow space or 22,000 square feet of indoor canopy.)  This provision was designed to reduce the likelihood of growing monopolies.  After January 1, 2023, there would be no limit on the size of marijuana farms.

Some of the items specifically prohibited under Proposition 64 include:

  • No licensee shall give away any amount of marijuana or marijuana products, or any accessories, as part of a business promotion or other commercial activity.
  • Marketing of marijuana products to minors is prohibited. This includes any marijuana products designed to appeal to children or to be easily confused with commercially sold candy.
  • Marijuana products must be packaged in child-resistant containers.
  • Any advertisements for marijuana are precluded from using symbols, language, music or cartoon characters aimed at appealing to those who are underage.
  • Marijuana cannot be advertised on billboards located along an interstate highway or state highway that crosses the border of any other state.  Billboard ads are also not be allowed within 1,000 feet of day-care centers, schools providing instruction in kindergarten or grades 1 through 12, playgrounds or youth centers.

Potential penalties for violating the above include:

  • Selling marijuana without a license can result in a misdemeanor charge with penalties of up to six months in jail and $500 in fines.
  • Selling marijuana or engaging in any other commercial activity in regard to marijuana without a license comes with civil penalties of up to three times the amount of the license fee for each violation.
  • Illegal operators could be ordered by courts to destroy the marijuana involved in the violation.

Due to the fact that Proposition 64 was on the California ballot, there are some unique provisions.  Two interesting ones are:

  • The California Department of Food and Agriculture is to “establish a certified organic designation and organic certification program for marijuana and marijuana products.” (Yes, organic pot!)
  • Only cannabis grown in a specific region can use that name on labels, packaging, or marketing materials. Further, materials for cannabis grown outside a particular appellation can’t display “any statement, design, device, or representation which tends to create the impression that the marijuana originated in [that] particular place or region.” (Growers cannot package their marijuana to say “Grown in Humboldt” unless it was actually grown there.)  This was designed to ensure that producers outside particular areas do not try to cash in on their names through clever branding.

For anyone interested in trying to obtain a marijuana-related license, you should consult an attorney, to make sure you are in compliance with all of the licensing requirements for all governmental entities and local municipalities.

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