Major changes are coming to California’s legal cannabis market

Oct 19, 2022

Cal Cities is preparing a draft ordinance and will hold educational programs to help cities move into compliance with the new cannabis delivery law. The state also created a related grant program.

In September, Gov. Gavin Newsom signed several bills that will expand California's legal cannabis market, including one that creates a framework for interstate commerce. By far the most consequential measure for cities is SB 1186 (Weiner).

Under SB 1186, cities will need to adopt new ordinances by January 2024 that allow for the delivery of medicinal cannabis to patients or their primary caregivers. Depending on the type of cannabis retailer, this may also require changes to local land use policies to allow for non-storefront retail licensing.

The League of California Cities strongly opposed the bill when it was introduced earlier this year and was able to secure critical amendments that narrowed its scope to require delivery only. The original bill mandated storefront medicinal retail, which would have infringed even more heavily on local land use policies.

Lawmakers claimed that the local decision-making authority guaranteed to cities through the Medicinal and Adult Use Cannabis Regulation and Safety Act has adversely impacted access to medicinal cannabis. However, there are over 200 jurisdictions that allow some form of medicinal and adult-use retail, with additional jurisdictions contemplating expanded access this election cycle. In total, 99% of Californians already live within the county or a city — and in most cases, both — where retail cannabis is allowed.

Resources for cities

To help cities comply with this new law, Cal Cities is preparing a draft ordinance for cities to consider. This will include pathways for potential revenues and options for cities that might also be contemplating the regulation of adult-use cannabis. Additionally, Cal Cities will host an online roundtable about the state’s cannabis regulations and possible strategies for cities on Oct. 25.

The state budget also included $20.5 million for a grant program to support cities and counties in the development and implementation of local retail cannabis licensing. The California Department of Cannabis Control is currently developing processes for the program; Cal Cities will provide updates when more information becomes available later this year.

Local officials can look to cities that have had great success regulating cannabis locally, such as Vallejo, Antioch, Desert Hot Springs, and Grover Beach. Their regulations have dramatically reduced the number of illegal cannabis operations and created opportunities to fund additional programs and services for residents.

Possible impacts on illegal cannabis

According to industry reports, roughly 55% of all cannabis sales within the state are in the illegal market. This means that the $5.2 billion in revenues received by the California Department of Tax and Fee Administration in 2021 could more than double if the illegal market is eradicated.

The state has taken measures to reduce illegal operations through the California Department of Justice’s annual Campaign Against Marijuana Planting program. Attorney General Bonta recently announced that the 2022 program has resulted in the eradication of nearly one million illegally cultivated cannabis plants and the seizure of more than 200,000 pounds of illegally processed cannabis. The program will shift into a year-round task force this fall.

While the state has committed resources to combat the illegal market, funding streams such as Proposition 64 are restricted to jurisdictions that allow for commercial cannabis activity. To fully tap into the resources needed to reduce illegal operations, cities will likely need to consider how legal cannabis regulations can complement enforcement on the illegal market.

More information about upcoming changes to the state’s regulatory framework, the retail access grant program, and how cities are responding will be available during the Cal Cities roundtable. For questions, please contact Legislative Affairs Lobbyist Elisa Arcidiacono.