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Big Win for the California Legal Market!

Big Win for the California Legal Market!

Industry Update #1

Let's be real, it's not exactly the smoothest sailing process to be compliant with regulations.  For the longest time, we had three different sets of rules that might or might not contradict with one another.  To say at the very least, operating a legal cannabis company can get pretty annoying.

Behind the veil of legal cannabis companies and the outward image we present ourselves in for stoners like you and I, there has been a disconnect between us operating to our fullest potential, legally, and how the rest of the world thinks we do or should.  So, California went and axed those three regulatory agencies and replaced it with one universal agency, the California Department of Cannabis Control (DCC), whose first act of business was to consolidate the rules and make it easier for companies to operate and remain in compliance.

Since the DCC took hold of the industry, however, not much has changed...at least it didn't until September 8th.  Last week, the DC published a 197-page draft of proposed changes to the cannabis regulations set forth by the three former regulatory agencies.  This set in motion what would be two of the biggest regulatory challenges we have been facing since the 2016 legalization: sampling and the distribution of branded merchandise.

You would think, sampling being such an integral part of distribution from seed-to-sale would be a little more robust right?  In fact, sending out samples of finished goods to a prospective dispensary or a distribution network is a full-time job for our staff all thanks to regulations mandated by the state.  As it used to be, Operations and Inventory Management departments would have to create a manifest of the proposed products going out, state the reasoning, and get the entire transaction approved by the state BEFORE physical products leave the facility.  Mind you, the approval process can be denied for whatever reason, thus hindering the ability to distribute legal cannabis products across the state at any given moment.


Proposed Sampling Changes

You would think, sampling being such an integral part of distribution from seed-to-sale would be a little more robust right?  In fact, sending out samples of finished goods to a prospective dispensary or a distribution network is a full-time job for our staff all thanks to regulations mandated by the state.  As it used to be, Operations and Inventory Management departments would have to create a manifest of the proposed products going out, state the reasoning, and get the entire transaction approved by the state BEFORE physical products leave the facility.  Mind you, the approval process can be denied for whatever reason, thus hindering the ability to distribute legal cannabis products across the state at any given moment.

With the new proposed regulations, physical products can be labeled as "trade samples" to be freely distributed to other companies within the supply chain.  The draft of regulations goes on to state that only companies that hold specific licenses such as testing laboratories, distribution centers, or retail licensees may obtain these samples and not individual people such as employees.

This eliminates the headache of pulling actual inventory, re-labeling them as samples and sending it off to a dispensary that might or might not use or sell the samples for profit, thus destroying the regulatory ecosystem that exists.


Proposed Branded Merchandise Changes

If you've ever walked into a dispensary, you are met with a wall of products from edibles to inhalables.  At that store, you're also likely to see branded merchandise of that particular store.  Under the previous regulations, it was illegal to sell branded merchandise that was not owned by the dispensary.  So no, if you are a fan of Weedsy, you wouldn't be able to find all our merch at your local dispensary.  Consequently, this made brand marketing even more difficult than it already is.

Under the new proposed regulations, branded merchandise may be sold in dispensaries on behalf of a particular brand as long as marketing and advertising regulations are still compliant.  While this is a little annoying to permanently affix our license number on our merchandise, having the ability to distribute both our products and merchandise to the entire state as opposed to only our website is a big win in many regards.


Closing Out

After the required comment period, and the DCC proposed regulations pass, operating our business should become a little more streamlined.  While it's not particularly a see-all, end-all fix to a lot of the woes we face on the backend, it is a start that we are looking forward to.

We'll keep you updated with more industry changes soon.  Stay tuned!

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