Dillon Shook

California Proposed Rule Changes Would End Cannabis White Labeling

California’s newest set of proposed cannabis business regulations contain several controversial changes, including a potential end to cannabis white-labeling, Marijuana Business Daily reports.

The new rules, of which drafts have been released, have not been finalized. The public comment period, however, has ended and regulators must now decide on the final rules.

In the newest draft rules, there is broad language that forbids licensed cannabis companies from doing business with any unlicensed company. This would include, for instance, celebrity brands or previously licensed cannabis businesses that are in flux.

Pamela Epstein, founder and CEO of Green Wise Consulting, said it is an end to white-labeling, also known as contract manufacturing or co-packaging.

Previously, established brands without cannabis licenses but with a pro-cannabis customer base would contract with licensed producers to have them make products on their behalf. Also, long-established cannabis businesses in the process of moving operations could temporarily contract another licensed producer to continue manufacturing their products.

The proposed changes would also lower the amount of cannabis products that delivery drivers are allowed to carry from $10,000 worth to just $5,000. The draft regulations also require that $2,000 of that $5,000 must already be ordered before a driver can leave a delivery hub. Previously, a driver would have needed just one order. The change would reduce delivery services’ efficiency and speed, as they would be required to return to a central hub more often to collect product instead of being able to dynamically adjust while on the road.

The definition of ownership in a cannabis company would also become more broad. Under the new definition, any employee or company executive that has say over what that company should cultivate, manufacture, or sell will be considered an “owner.” This will require more financial disclosures to the state, which some say will slow down the entire regulatory process.

The period for public comment officially ended Nov 5 for the proposed rules. However, California regulators have yet to finalize the current draft. It is unknown if they will make any further changes.

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