Source: https://www.directcannabisnetwork.com/legal-joint-collective-cooperative/
Timestamp: 2019-04-21 09:02:12+00:00

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You’ve probably heard that California’s medical cannabis collective and cooperative defense will end soon, on January 9, 2019. But what does that actually mean?
First, some history. In 1996, the voters of California passed a seminal initiative, Proposition 215, also known as the Compassionate Use Act. Proposition 215 gave medical cannabis patients and their designated primary caregivers limited immunity from prosecution for the possession and cultivation of cannabis. Back in those days, cultivation of a single cannabis plant, or the possession with the intent to sell any usable amount (even a smidgen), was a felony under California law, punishable by a sentence in the state prison.
Health & Safety Code § 11362.775. Qualified patients, persons with valid identification cards, and the designated primary caregivers of qualified patients and persons with identification cards, who associate within the State of California in order collectively or cooperatively to cultivate cannabis for medicinal purposes, shall not solely on the basis of that fact be subject to state criminal sanctions under Section 11357, 11358, 11359, 11360, 11366, 11366.5, or 11570.
Because § 11362.775 is a creature of the Legislature (as opposed to a voter initiative), it can be rewritten by the Legislature without violating the principle enunciated by the California Supreme Court in People v. Kelly (2010) 47 Cal.4th 1008, that only the voters, not the Legislature, have the power under the California Constitution to amend Proposition 215. In other words, any amendment to § 11362.775 would amend Senate Bill 420, not Proposition 215.
There were two “loopholes” to Health and Safety Code Section 11362.775. (For ease of reference, the term collective is used hereafter, and denotes both collectives and cooperatives.) First, there was no limitation on how many patients or caregivers could join a collective, which eventually led to numerous collectives with thousands of members. Second, there was no limitation on how many collectives a patient or caregiver could join, which led to the same result. Over the years, this morphed into the “collective / co-op model” where practically anyone with a medical cannabis recommendation could sign up to be a member of a medical cannabis collective and would then provide medical cannabis in exchange for “reimbursement” for expenses, ostensibly on a not-for-profit basis.
Under this model, with no regulation whatsoever from state authorities, and minimal, if any, regulation at the local level, the medical cannabis industry in California grew, multiplied and thrived. Before the current era of regulated “commercial cannabis activity” which officially commenced on January 1, 2018, the cannabis industry in California was a vibrant example of laissez-faire capitalism.
Health and Safety Code § 11362.775 was subsequently amended in 2015 when the Legislature passed the Medical Marijuana Regulation and Safety Act, with the unfortunate acronym MMRSA, which sounds like the deadly superbug Methicillin-resistant Staphylococcus aureus. MMRSA introduced a convoluted regulatory framework for medical cannabis which did not allow cultivators direct access to consumers; all transactions were to be mediated by licensed distributors. In order to force medical cannabis operators into the regulated system, an expiration date was put on collectives and cooperatives (with a floating date of one year after the state started issuing state medical cannabis licenses), and thus a sunset clause was grafted onto § 11362.775.
MMRSA was quickly rebranded MCRSA, the Medical Cannabis Regulation and Safety Act. After Proposition 64, known as the Adult Use of Marijuana Act (AUMA) passed resoundingly in late 2016 and established a similar, but different regulatory framework, regulators realized that they did not want to come up with two confusing sets of convoluted regulations, one for medical cannabis and one for adult-use cannabis. The Legislature ended up repealing the medical framework and combining the two different regulatory frameworks into one unitary regulatory framework branded the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) which is currently in effect. Despite all of these changes, the sunset clause on collectives and cooperatives remained.
(a) Subject to subdivision (d), qualified patients, persons with valid identification cards, and the designated primary caregivers of qualified patients and persons with identification cards, who associate within the State of California in order collectively or cooperatively to cultivate cannabis for medicinal purposes, shall not solely on the basis of that fact be subject to state criminal sanctions under Section 11357, 11358, 11359, 11360, 11366, 11366.5, or 11570.
MAUCRSA amended Health and Safety Code section 11362.775, the provision in SB 420 affording legal protection to cannabis collectives and cooperatives. This protection will end one year after the Bureau of Cannabis Control (Bureau) posts a notice on its website that the state commercial cannabis licensing authorities have commenced issuing licenses. Once the one-year period tolls, all cannabis collectives, and cooperatives that continue to engage in commercial business will need to be licensed, except for: (a) individual patients; and (b) caregiver gardens serving no more than five patients.
The Bureau posted the notice on its website on January 9, 2018. Thus, the protection against criminal sanctions for cannabis collectives and cooperatives ends January 9, 2019. At that time, cannabis collectives and cooperatives that seek to continue their operations will need to obtain a state license and comply with any local requirements.
(2) Conduct that constitutes grounds for denial of licensure under Chapter 2 (commencing with Section 480) of Division 1.5, except as otherwise specified in this section and Section 26059.
(7) The applicant, or any of its officers, directors, or owners, has been sanctioned by a licensing authority or a city, county, or city and county for unauthorized commercial cannabis activities, has had a license suspended or revoked under this division in the three years immediately preceding the date the application is filed with the licensing authority.
While moving towards a state-licensed commercial market is a positive achievement overall considering the drastic decrease in life-altering felony arrests and prosecutions, the unfortunate reality for many longtime California cannabis operators is that permits are not available in most parts of the state. Even in those cities or counties where local permits are available, suitable locations are limited, and competition is fierce.
Inevitably, many legacy businesses who were able to thrive in an unregulated market with minimal barriers to entry won’t be able to make it through the licensing process simply due to location, economic constraints, and lack of access to capital. Yet, those who want to do things legally and who don’t want to hurt their chances of obtaining a license in the future, including cannabis businesses that previously operated as collectives and cooperatives, must obtain the requisite local permits and necessary state licenses.
How will the world end for most collectives and cooperatives? Not with a bang but a whimper. This was foreseen by immortal activist Mickey Martin, who predicted back in 2015 when the sunset clause was first unveiled that “the cannabis industry as you know it” would die a slow death.
As the midnight hour approaches and medical cannabis collectives and cooperatives are about to turn from golden carriages into pumpkin coaches, it is worth recalling the many exhilarating, perilous, and unpredictable journeys traveled all across the Golden State by patients and caregivers aboard these soon-to-be-legendary transports.
The above information is provided as a public service. It is not intended as legal advice. Written by Omar Figueroa and Lauren Mendelsohn of Law Offices of Omar Figueroa.

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