Cannabis is the hot, new ingredient for companies across the world. The expanding scope for its usage in various industries including, medicine and cosmetics, opens a new avenue for multiple ventures. Legalization has encouraged more people to experiment with this plant. They are excited to try the fresh new range of products that companies bring to the market. With such ample interest, the potential in this market is ecstatic.
As more companies start to practice cannabis, they will begin to face the inevitable part of entering a tricky market. Cannabis is slowly moving from the shadows of being a prohibited substance. Hence, there is so much to consider while entering this market. The process would be quite similar to that of alcohol companies, and the evolution will probably be the same story. Given that most of the interested investment companies hail from alcohol and related industries, from licenses to legalities, the turf might be quite familiar to these players.
Here are five important legal considerations that apply to both cannabis and alcohol ventures to watch out while venturing into this market.
1. Cannabis is still an illegal substance under federal law: Few states and countries have liberated the use of marijuana. But do keep in mind that cannabis is a controlled substance in the eyes of the federal law. Legalization mandates a set of rules for cannabis companies to abide. These regulatory fences have been made and strictly applied to avoid misuse of this plant. On the contrary, some acts restrict the use of federal enforcement to control the substance in states where it is currently legal. With such conflicting facts and grey areas, it is better to discuss the details with your lawyer to ensure you stay updated with the state laws.
Cannabis might seem like a healthy investment option. But when you dig deep, you start to realize the sensitivity of the legal evolution phase this substance is going through, and how much it increases the risk of investment. So, unless you are ready to commit and risk for a long term and watch how all these laws pan out, cannabis might not be a space for all.
2. Think before you get ready for private parties or events: Big events are every alcohol and cannabis marketers dream. It is a platform to put forth your product and gain all the attention and sales you need. Cannabis laws restrict the use of the substance in public events. So far legalized states have included the requirement to cover private parties under their regulations. But this does mean you need to gather the appropriate state licenses and keep alcohol off grounds. Also, what classifies as a private party or event has been a conflicting space for consumers and legal organizations for many years now. If the event is a commercial transaction, then ABC[Alcoholic Beverage Control] and BCC [Bureau of Cannabis Control] regulations apply to them. With so many considerations, finding the right game where the premises permits on-site consumption of cannabis, as well as alcohol, can be difficult for marketers.
ABC has shut down various parties and premises for public consumption of alcohol, cigarettes, or cannabis products. The only workaround, for now, is to choose unorganized, private events where there is no commercial transaction with the owner. The event should commence with the permission of the owner and of course not charge for food, alcohol, cannabis, or any services offered in the premise. This type of events could be the only way to keep the law enforcement off your tail. Or of course, you can wait for the regulations to shower upon some positive moves in your favor in the days to come.
3. Partnering alcohol and cannabis licenses are going to become common: In states like Ontario cannabis-infused drinks are the latest rage. Both cannabis and alcohol ventures look at it as a real opportunity to venture into and capture a wide range of audience. Multiple campaigns are running over the internet, and companies are coming up with huge events to advertise the union of alcohol and cannabis. And of course, ventures are also trying to leverage the brand names they have laid upon in the alcohol industry into introducing amazing cannabis lines without having to take up the burden of acquiring cannabis license. They are looking at profitable partnerships that can get them the line ready for sale under their tags. While this type of arrangement does leave less control of the product in the company’s hands, finding good partners who will stand by the compliances necessary can benefit both the parties. This will also help launch these infused drink lines right in time for the market.
4. Alcohol + Cannabis products are going to be a tough call: While terms like weed beer and cannabis wine are slowly catching up, the Department of Public Health states emergency regulations which bans the infusion of alcoholic beverages with cannabis. Although the law states an exception on “tinctures” without defining the term, this loophole may not last long, as the laws are closing in fast around cannabis consumption. Most of these weed-infused drinks are non-alcoholic beverages or contain only terpenes derived from hemp. From a consumer perspective, these infused drinks are a huge potential. But for companies, the production perspective regulates that you have both alcohol and cannabis licenses.
Also, distributors or sellers would need both a cannabis license and a California alcohol license, which violates the business and profession code, making the market for such drinks a tough space to crack. CBD and hemp products are a whole new problem to discuss. Legalities surrounding these products are still grey, and even companies that have products on the market currently are at the risk zone for lawsuits. Also, with the pharmaceutical industry closing clinical trials on CBD, chances that it gets categorized as a drug are higher. This action would mean they might eliminate CBD from food or supplement categories.
5. You would require both states as well as local licenses to buy, distribute or sell cannabis: States which legalized cannabis are releasing marijuana slowly into the system with much control over the substances to avoid misuse. Companies need licenses for both medicinal as well as recreational cannabis cultivation. Permits are also mandatory for producing, distributing, or selling products, even in the case of co-marketing partnerships. Cannabis licensing also requires approval from local authorities. Also tied house laws, unlike in the case of the alcohol industry isn’t applicable for the cannabis industry except for testing facilities.
Also given one can buy weed online easily in legalized states, the regulations are getting tighter here too. A company cannot acquire licenses for both alcohol and cannabis to be served under the same premises. While there are workarounds to get past this problem, ventures should instead focus on points such as acquiring permission from the landlord, TTB[Alcohol and Tobacco Tax and Trade Bureau] permits. A ray of hope in California mainly is the expanded cannabis license option that includes a shared facility option for manufacturers. This type of licensing is common in the alcohol industry and can help small firms participate in the legal market without having to lay down huge investments on equipment.
The cannabis industry is transforming rapidly and slowly evolving through tight regulations. The laws are bound to get more comfortable and familiar in the years to come, which could be in favor of alcohol and cannabis ventures to serve their customers better.
If you need the assistance of a Cannabis business attorney to obtain licensing for your Cannabis business, please contact our law firm anytime.