Unless you have been hiding under a rock, you know that California just legalized cannabis commerce this year. California’s influence, with nearly 40 million people and the world’s 6th largest economy, virtually cannot be overstated in our fight to end the failed and harmful policy of marijuana prohibition. The world is watching and the woman in charge of the Golden State’s regulatory regime is Lori Ajax, Chief of the Bureau of Cannabis Control, aka the Cannabis Czar.
Even with the amount of work she has had to do to bring California’s legalization system online, Ms. Ajax took the time to answer several questions from me, just ahead of her appearance at the International Cannabis Business Conference in San Francisco this February 1st & 2nd:
Question: The initial rules for California cannabis businesses are now out, how has the feedback been thus far?
Lor Ajax: So far things have been good. I think people realize the initial regulations are a starting point. We welcome continuing feedback about how things are working as the state begins regulating cannabis businesses starting January 1.
Of course, the California marijuana market needs to satisfy the needs of Californians, but have there been any lessons that you have learned from other legalized states that have impacted some of the initial rules?
Ajax: We were fortunate to learn from the other states that have legalized medicinal and adult-use cannabis prior to legalization in California. An important lesson is that many of these states are continually making changes to their regulatory systems to address requirements that may not work as intended or new emerging business models. Even though we have our emergency regulations in place, in early 2018 we will begin the regular rulemaking process, which includes public hearings across the state and a longer comment period.
You decided to issue temporary licenses, what was the thought process behind that?
Ajax: Due to the aggressive timeline to issue licenses by January 1, 2018, we needed to utilize our statutory authority to issue temporary licenses. The temporary licenses will be good for 120 days and during that time the licensee will need to submit a completed annual application to the Bureau for the temporary license to be extended for 90 days.
Keeping the price of cannabis down is a big issue to curtail the illegal market. Are you concerned that the combination of licensing fees, taxes and regulatory costs will unnaturally inflate the cost to consumers and what was your thought process when developing the different fee structures?
Ajax: Our licensing fees are based on the cost to administer our regulatory program, including licensing and enforcement. To assist with minimizing barriers to entry into the cannabis industry, state temporary licenses are free. As for taxes, the Bureau does not control the rate at which cannabis is taxed.
Will you revisit compliance costs if it seems that too many consumers are still drawn to the cheaper prices in the illegal market?
Ajax: We are continually reassessing our program needs, while looking for ways to bring people into the regulated market.
Are you confident that the initial rules will keep the federal government from interfering with California licensees?
Ajax: All we can do is continue to do the work we have in front of us – and there is still quite a bit to do in the early part of 2018. We can’t control the actions of the federal government but we have worked to develop a comprehensive regulatory system that addresses the Cole memorandum concerns to the extent possible.
Have you sought feedback from federal officials or US Attorneys? Any (more) plans to do so in the future?
Ajax: We have not had any contact with the federal government at this point and are focused on the work we have to do to implement our program.
Do you have a set date to reconsider certain rules, or are you waiting for the process to play out? What types of data points will you be most interested in?
Ajax: I think at this point we really want to see how the regulations roll out in early 2018. Throughout this process, we have been open to feedback and making changes, so we will continue to make adjustments. In 2018, as we go through the regular rulemaking process, the emergency regulations will be evaluated and determinations will be made as to which sections should remain or be changed. The regular rulemaking process allows for significant public involvement.
All eyes are on California, the 6th largest economy (maybe soon to be the 5th) in the world, what are you most concerned about in the rollout of the commercial system?
Ajax: A smooth transition is definitely something we are focused on and we hope that the transitional plan we developed will provide for that smooth transition into a regulated market. We are confident that the regulatory system we developed in consultation with a wide variety of stakeholders will serve California well.
California regulators have embarked on a huge task, what have you been most proud of as you and your team have developed these rules?
Ajax: That we were given a big job and we were able to achieve our goal. We started issuing licenses ahead of our January 1 mandate and we did this with a lean but very dedicated and hardworking staff. So many hours were put into getting us to this point and we are hopeful that at the end of the day we have put forth a model that other states will look to as an example when they head down the path to legalization.