California's Wild West of medical marijuana is about to be tamed, less than a month before a vote that could greatly expand recreational use of cannabis.
New state regulations will demand testing, labeling, certification and licensing medical marijuana _ every step along the way, from seed to sale.
The new rules, starting in 2018, could also boost marijuana prices, as businesses face more paperwork, permits, licenses and other requirements, driving up their costs _ and likely pushing some mom-and-pop growers and dispensaries out of business.
While the changes may complicate doing business, the goal is simple, said Lori Ajax, chief of the state's Bureau of Medical Cannabis Regulation.
"We are looking to protect patients, the public and the environment," Ajax said at meeting in Oakland last month for the commercial cannabis industry hosted by her fledgling bureau.
"If you are engaged in commercial medical cannabis, you need a license," said Ajax, who has decades of experience administering the state's complex alcohol laws with the Department of Alcoholic Beverage Control.
Two decades after the state pioneered the legal use of medical marijuana through Proposition 215, its cannabis industry has been operating under a patchwork of local regulations _ or outside the law altogether.
This local control is very different from the approach taken by other states, such as Colorado, Washington and Oregon, which put the state in charge from the very beginning.
"California has always done things its own way," said attorney Amanda Ostrowitz of CannaRegs, which tracks marijuana laws and regulations around the nation.
But while local control has worked well in some places, such as San Jose and Oakland, other communities have struggled to keep tabs on businesses that operate on the margins of legitimacy.
For example, San Mateo County has about 40 marijuana delivery services that are illegal under county codes, said Ryan P. Mullane, a Santa Clara criminal defense and cannabis licensing attorney. In Los Angeles, overwhelmed police say that public safety deserves far more attention than unlicensed dispensaries.
"Cities don't have the capacity to enforce the same robust regulations that the state can," Ostrowitz said. "The state has more money to run these programs and enforce them."
The new California rules create an extensive, heavily regulated system for growing, testing and selling medical marijuana _ and would become the template if voters pass Proposition 64, which would legalize recreational marijuana.
The change was signed into law last October by Gov. Jerry Brown. Local governments are still free to pass more restrictive laws. San Jose and Oakland, which already tax dispensaries and limit where they are located, will both keep their regulations in place. A dual-licensing system requires the industry to obtain both state and local permits.
The federal government _ which still considers cannabis a Schedule I illegal drug, with heroin and LSD _ won't crack down on marijuana dispensaries that follow local and state rules, as long as those businesses stay within California.
Two other state agencies also will be responsible for the new marijuana oversight, including the Department of Food and Agriculture, which will license growers, and the Department of Public Health, which will license manufacturers.
The state held workshops in seven cities with members of the industry to guide how its final regulations are written. It will also offer a written comment period and public hearings.
Meanwhile, 60 percent of California voters polled say they favor Proposition 64. The measure would boost sales in an industry already valued at $2.7 billion a year, according to The ArcView Group, a marijuana market research firm. If legalized for recreational use, annual sales are projected to reach $6.6 billion by 2020.
However, the looming rules have put the cannabis industry into a tailspin, forcing it to wade through 300 pages of regulations.
One major concern is a rule that requires growers to hire an independent distributor to take products to a testing lab and certify the results. Only then can growers sell the certified marijuana to dispensaries.
"Everything has to be tested," said Ostrowitz, the CannaRegs attorney.
And no longer can buyers and sellers just drive to some random location to exchange marijuana for cash. Now a state-issued "transportation manifest" is required for commercial shipments.
There are also complaints about the cost of licensing growers, which could favor big businesses over small cultivators with a few plants in their garages.
"Now you're telling them they need $20,000 to get a license and $100,000 to renovate for electrical permits and pay 20 percent in taxes," Mullane said. "That is the biggest challenge _ getting participation from small to medium-sized actors.
"A lot of people are used to operating outside the law."
