One-Hit Wonders

CANNABIS EVENTS IN CALIFORNIA: 2023 UPDATE

Published

1 year ago

March 28, 2023

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By Lauren Mendelsohn

March 15, 2023

Cannabis-related events have been happening in California for many years. The State’s governing cannabis law, the Medicinal and Adult Use Cannabis Regulation and Safety Act (MAUCRSA), and the regulations issued by the Department of Cannabis Control (DCC), allow such activities provided that applicable guidance is followed. We’ve had the honor of representing clients in connection with multiple cannabis events over the past few years, including the Emerald Cup Harvest Ball and the Power of Flower Festival, and thus have experienced these rules first-hand.

The laws and regulations governing cannabis events in California are codified in Business & Professions Code §26200 and 4 CCR §§ 15600-15604, respectively.We previously wrote about cannabis events here. Much of what was stated in that blog post is still true, but there have been some notable changes in the interim.

First, to summarize the basics:

A “Temporary Cannabis Event” (typically referred to simply as a “Licensed Cannabis Event” or simply a “Cannabis Event”) is a state-and-locally-approved event that includes onsite cannabis sales and consumption.
A Temporary Cannabis Event license is required for each Temporary Cannabis Event, and each such event may span no longer than four (4) consecutive days.
Temporary Cannabis Events can take place at a county fairground, district agricultural association, or any other venue approved by the local jurisdiction.
In order to apply for a Temporary Cannabis Event license, one must first hold a “Cannabis Event Organizer” license.
A Cannabis Event Organizer license authorizes the holder to organize Temporary Cannabis Events, but does not allow the holder to engage in other forms of commercial cannabis activity.
Holders of Cannabis Event Organizer licenses may hold other types of cannabis licenses.
Only persons 21 years of age and older may purchase and consume cannabis at Temporary Cannabis Events.
A Temporary Cannabis Event premises cannot include an area licensed for alcohol or tobacco sales.
Licensed cannabis businesses may participate in a Temporary Cannabis Event in various ways, but only licensed retailers may sell cannabis to attendees at the event.
Cannabis goods sold and displayed at a Temporary Cannabis Event must comply with the DCC’s regulations.
Advertising and marketing restrictions still apply at Temporary Cannabis Events.
Licensed Cannabis Event Organizers are responsible for ensuring that the applicable laws and regulations at a Temporary Cannabis Event are followed.
Events that are purely educational in nature, without any sale or consumption of cannabis, do not require a license from the DCC.

Below are some recent updates to the rules governing cannabis events in California.

Modifications to Application and Operational Requirements

Previously, applicants for a Temporary Cannabis Event had to provide a list of all of the employees for every vendor who will be participating in the event. That requirement has since been eliminated, though a full list of participating vendors and licensees must still be submitted to the DCC no less than 72 hours before the event. (4 CCR §15601(g).)

All employees of participating licensees must wear an employee badge that includes, at minimum, the “licensee’s “doing business as” name and license number, the employee’s first name, an employee number exclusively assigned to that employee for identification purposes, and a color photograph of the employee that clearly shows the full front of the employee’s face and that is at least 1 inch in width and 1.5 inches in height.” (4 CCR §15043.) This is a relatively new rule – originally the badge requirement only applied to retail employees, yet the current version applies to all employees of licensees participating in a Temporary Cannabis Event even if they are employed by a licensed cultivator or manufacturer who is simply displaying their products.

Applicants for a Temporary Cannabis Events must now identify a limited-access area on the event premises diagram that is accessible only to the DCC, and then must provide the DCC with exclusive access to that area at the event. (4 CCR §15601(n).)

Participation in Temporary Cannabis Events by Non-Retail Licensees

A new regulation adopted in November 2022 addresses the question of non-retail licensees participating in a Temporary Cannabis Event. Prior to adoption of this rule, the only potential way for non-retail licensees such as cultivators and manufacturers to participate in such an event (other than as an attendee) was to display personal amounts of their cannabis goods in accordance with 4 CCR §15604. However, this proved to be unworkable, so §15603.1 was created.

This new rule sets clear limitations on how and in what quantities non-retail licensees may display their cannabis goods at Temporary Cannabis Events:

4 Cal. Code of Regs. §15603.1. Participation in Temporary Cannabis Events by Non-Retail Licensees.

(a) Licensees who are not retailers may participate in licensed temporary cannabis events and may display cannabis or cannabis products in accordance with the following:

(1) Cannabis or cannabis products displayed shall not exceed the following amounts: (A) 85.5 grams of non-concentrated cannabis.

(B) 24 grams of cannabis concentrate.

(C) 18 immature plants.

(D) 21 seeds.

(2) Cannabis or cannabis products may be provided to attendees of the event for inspection and educational purposes only. Cannabis and cannabis products used for display shall comply with the provisions in subsections (b) and (c) of section 15405.

(3) Cannabis and cannabis products for display purposes by non-retail licensees only may be brought to the licensed event by the licensee or their employees. However, no individual shall transport an amount of cannabis or cannabis products that exceeds the possession limits established in section 11362.1 of the Health and Safety Code unless such individual is a licensed distributor or their employee transporting in a distribution vehicle.

(b) Licensees may display non-cannabis containing items such as cannabis accessories, packaging materials, promotional materials, and branded merchandise.

(c) Licensees may sell branded merchandise and cannabis accessories in compliance with local and state laws governing the sale of goods.

Authority: Section 26013, Business and Professions Code. Reference: Section 26013, Business and Professions Code.

While there are still some kinks to work out – for example, the individual possession limit in Health and Safety Code §11362.1 is less than the amount that a non-retail licensee is able to display under 4 CCR §15603.1 (one ounce versus 85.5 grams), meaning that multiple employees or representatives of the licensee would be needed to transport the cannabis goods if the licensee wishes to display the maximum allowed amount – this is still a major improvement over the previous rules.

Educational or Informational Cannabis Events

It’s important to note that events that are purely educational in nature, without any sales or consumption of cannabis, do not require a license from the DCC. At such events, personal amounts of cannabis may be displayed for educational or informational purposes. (4 CCR §15604.)

New Guidance for Cannabis Events

TheDCC has a new page on their websitewhere licensees and the public can find information about licensed cannabis events, as well as review a list of Frequently Asked Questions.

We anticipate that cannabis events will continue to grow in popularity, along with the cannabis tourism and experiences sector overall, over the coming years. Stay tuned to our blog for future updates on this topic.

This information is provided as a public educational service and is not intended, nor should be construed as, legal advice. For specific questions regarding cannabis events in California, contact the Law Offices of Omar Figueroa at 707-829-0215 orinfo@omarfigueroa.comto schedule a confidential consultation.

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One-Hit Wonders

Driving Under the Influence of Marijuana

Published

3 months ago

January 24, 2024

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No national standard exists to determine how long someone should wait to drive after consuming marijuana. However, experts at the Colorado Department of Public Health and Environment recommend waiting at least six hours after smoking less than 35 milligrams of THC and eight hours after eating or drinking something containing less than 18 milligrams.

For reference, a “typical” marijuana cigarette contains at least 60 milligrams of THC, and most edibles contain around 10 milligrams per serving size. A 12-hour wait is safer, as the high (and subsequent drowsiness) from smoking a typical amount lasts far longer.

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One-Hit Wonders

How can it help distressed cannabis companies today?

Published

1 year ago

April 6, 2023

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Without the option to declare bankruptcy—due to federal illegality—the only recourse for cannabis businesses in distress to become solvent and / or distribute assets to creditors is to enter into an expensive and difficult judicial cannabis receivership. Receiverships are inherently adversarial, and the required input from third-party experts, lawyers and regular engagement with the courts can be incredibly costly.

Meanwhile, businesses operating in mainstream sectors have the ability to declare bankruptcy. This is also a court-ordered procedure that allows companies to satisfy lenders by liquidating assets, restructuring operations and finances, and to enjoy a break of sorts to make deals with creditors and renegotiate contracts and leases. Without a change to federal banking laws, cannabis companies are blocked from the benefits of bankruptcy, and the situation is only getting worse.

Given the current tight capital market environment, the increase in cannabis distressed assets, and the shortage of options to cannabis operators to address said challenges, is there a possible alternative option to alleviate the rather dire situation?

Genesis—Transition from Equity Financing to Debt Financing

Equity financing has been the most prominent way to raise capital in cannabis for the last several years. However,recent data collected by Viridian Capital Advisorsreveals that debt currently makes up 93% of capital raised by U.S. cannabis cultivation and retail companies, compared to 55.7% in U.S. industries overall.

This change in the capital-raising environment, which has led to an increased number of creditors in the sector, combined with continued market pressures on cannabis businesses to remain competitive, make it highly likely that the industry will inevitably see more receiverships.

Ultimately, while debt financiers are willing to lend cannabis businesses money, they expect to be paid back on time and often with high interest. If the business begins to struggle and enters a distressed phase that leads to receivership, the business assets will be sold off and the secured lenders will be the first to get paid, while the business itself is likely not to recover much.

Consider an Administrative and Collateral Agent

With receiverships punishingly expensive and the debt financing landscapebordering on predatorial, distressed cannabis businesses are desperate for any assistance or support available. An Administrative and Collateral Agent (ACA) could be the alternative support required, benefitting borrowers, lenders and regulators alike, and offering a more cost-effective and less punitive option to courts, receivers and lawyers.

Instead of dealing with the courts and an expensive court-appointed receiver, cannabis companies seeking relief could turn to an ACA to facilitate mediation between parties and create alignment within the industry, which does not exist today.

An ACA could create a level of trust, transparency and complementary positioning with industry participants that simply has not yet existed in cannabis. The use of an ACA could challenge the competing perceptions that there is already alignment between regulators, operators and lenders, or that a useful alignment between these parties could ever exist.

An ACA could be a real and valuable tool for state governments and regulators as they begin to understand that it is in their best interests to assist cannabis businesses in their states in the face of continued federal illegality and restrictions. Under a private agreement between parties, the ACA would conduct something more akin to an administrative receivership as opposed to the traditional judicial receivership that is the only current option for insolvent cannabis businesses to seek relief.

Building upon a Cannabis Credit Rating Framework

Ideally, an ACA would work within an industry-specific credit rating system for cannabis businesses in distress in order to work within an established framework for potential investors. If cannabis companies are ranked across an equitable, systematic and formulaiccredit rating system, borrowers, lenders and regulators would benefit from the quantifiable transparency afforded by said rating, and debt financing would have an inherent regulatory-like structure to prevent predatory lending. By avoiding the courts, the distressed cannabis company would save time, money and create a more attractive scenario for potential lenders.

Initial Path to Mitigating Solutions

While the current challenges facing cannabis businesses today are well documented and have risen to both creditors and regulators attention, a viable solution has yet to be identified. Most likely no one solution exists beyond waiting for the economic and capital environments to evolve. Yet, mitigating options do exist.

The introduction of an ACA is one such option. Questions remain as to the mechanics, regulatory, operative and fiscal alike, as well as who to trust to take it on. The introduction of a credit rating framework is the first step to creating a solid foundation from within which an ACA can operate transparently and equitably. Any potential buy-in from regulators, creditors and operators remains an open question.

All of that said, there is today an unprecedented set of market forces that is pushing all cannabis stakeholders to think outside of the box. The still growing opportunities in the cannabis industry, the will of operators to survive and succeed, as well as the increasing exposure from creditors, all point to not only an acceptance for the need of an alternative, but to the drive to do things differently.

Is your cannabis business in distress? Would you benefit from expert guidance and support in deciding on whether to enter into a receivership?Reach out to United CMC today.

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One-Hit Wonders

United States: Alex Malyshev And Melinda Fellner Discuss The Intersection Of Tax And Cannabis In New Video Series – Part VI: Licensing (Video)

Published

1 year ago

April 4, 2023

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Carter Ledyard is pleased to announce the launch of our short-video series on the cannabis industry focusing on business and legal issues for those companies and entities interested in doing business in New York.

This series offers a perspective on tax policy and specific statutes affecting cannabis businesses today. Our cannabis shorts are a great way to get to know our professionals, Alex Malyshev and Melinda Fellner, in quick and easy to watch clips, packed with the salient information you need.

In Part VI of our series, Alex and Melinda discuss licensing for cannabis businesses in New York. Watch below!