Regulatory Scrutiny for California’s Cannabis
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Commentary

Regulatory Scrutiny for California’s Cannabis

How One State Law Can Help Relieve Regulatory Pressure

California’s state cannabis regulators are accepting public comments on their proposed final regulations on the market for adult recreational marijuana. If the regulations are approved, they would take effect beginning January 1, 2019.  In public forums around the state, interested laypeople, advocates, and industry members alike will undoubtedly express myriad views on the more than 200 pages of mandates and procedures.

For the most part, the rules largely continue the approach of the emergency regulations that were previously issued.

One state law in particular that grew out of Proposition 64 is notable for its potential to influence these new rules in intriguing ways. It’s codified as Business and Professions Code 26013(c) and it requires that all regulations be necessary to achieve statutory purposes, based on the best available evidence, while also not unreasonably restricting licensees from using alternative methods or procedures to comply with the same statutory requirements. Colorado and other states have somewhat similar language in their cannabis bills, but the legal scope (and potential influence) of California’s is unique in that it expressly permits alternative procedures or technologies for compliance.

It will be interesting to see how state regulators accommodate this law, as it requires a type of empirical evaluation that is absent from most other regulations, and pushes regulations toward a more hands off approach.

Regulations that are evaluated ex ante can be subject to entirely different scrutiny by courts depending on enforcement, the real-world consequences of those mandates, and the private actions and decisions of licensees to best comply.

Even though California’s new regulations engage in a considerable amount of top-down mandates, it is still very possible that due to the Business and Professions Code 26103(c), their implementation will be more flexible in practice. If new regulations can’t be measured and shown to be both necessary and as flexible as the law requires, it will be challengeable in court.

That means it would be far wiser for state regulators to avoid some of the elements in the draft rules that dictate how cannabis businesses are structured, restrict how stores are organized internally, impose pro-union policies and mandate renewable energy practices, all of which are difficult to argue, will achieve the statutory purposes of Proposition 64.

Matt Harrison is a senior fellow with Reason Foundation and author of California’s Proposition 64.