California’s new Medicinal and Adult-Use Cannabis Regulation and Safety Act is the new law in the state for regulating the legal retail cannabis industry. The cooperatives that grew from the 1996 Compassionate Use Act are often referred to as the gray market since the law was loosely defined making interpreting its verbiage up to each city and town in California. While the vagueness of the 1996 act may have fully been intended, California is ready to move onto a truly defined retail marketplace for adult-use cannabis and will ferret out gray market businesses.

The new law is providing the gray market some latitude to clean itself up, but for those businesses that do not comply by the beginning of next year they will see authorities come and shut them down. In the meantime the general belief is that much of the gray market will comply and that the cooperatives not participating in illegal retail sales will tattle on the others still selling marijuana.

California does not have much choice but to tolerate the CUA collective model through early 2019 because MAUCRSA preserves the criminal immunity of CUA collectives and cooperatives for up to one year after the first MAUCRSA licenses begin to issue. The MAUCRSA drop-dead date on those collectives and cooperatives is now January 9, 2019, giving CUA collectives and cooperatives at least 10 more months to operate in the legally gray marketplace. This though has not stopped the California Bureau of Cannabis Control from targeting those CUA collectives and cooperatives that openly engage in unlicensed commercial cannabis activity.

California has started sending cease-and-desist letters to unlicensed CUA collective and cooperative operators believed to be engaging in commercial cannabis activity that violates MAUCRSA. It has also started cracking down on ancillary advertisers, like Weedmaps, for promoting unlicensed operators and their products in violation of MAUCRSA marketing and advertising restrictions. These will not be the last efforts we see on behalf of the state to try to limit illegal cannabis operators in California.