In February 2016, Governor Jerry Brown appointed Lori Ajax as the first Chief of the newly formed California Bureau of Medical Cannabis Regulation. Prior to her appointment, Chief Ajax served as Chief Deputy Director at the Department of Alcoholic Beverage Control where she spent 22 years working her way up the ranks, starting at the investigator trainee level. Once the people of California passed recreational cannabis last November, Ajax’s office became the Bureau of Cannabis Control responsible for regulating non-medical cannabis and significantly expanding Ajax’s responsibilities. Ajax’s office has been loaned $10 million by the state to set up a 25-person bureau that can begin issuing licenses on January 1, 2018.
At the time I got hired, we only had the Medical Cannabis Regulation Safety Act. I was just hired to do the statewide regulatory system for medical. Then later in the year adult-use passed so it really expanded the scope of the job. So, at the time I took the job, I didn’t know that it was on the horizon and I wasn’t even sure it would fall under the bureau. Would I still take it (the job)? I probably would. I still think not knowing a lot about the cannabis industry, I probably didn’t realize how immense the job was. My eyes are wide open now. It would be a different thought process this time around but it’s hard to go back and say what you would have done.
We have done a lot of touring, and I still do tours because each time what I am looking at, compared to what I was looking at a year-and-a-half-ago, is from a different lens. When I was new at the job and didn’t know a lot, I was still in awe, and like, ‘wow, this is all here.’ Now that we have our draft medical regs out there I am looking at it with a different eye. I am looking at it from the viewpoint of how do our regulations fit in here? I think it’s still important for us at the Bureau to continue seeing cannabis operations and how they are operating and how that fits in with the regs that we are going to be developing.
That’s one nice thing, we get to look at what some of the other states have gone through. You look at how the edibles were rolled out in Colorado and how our regulations could be stricter from the start as they relate to the edible market or even consumer safety campaigns about how to use edibles. That’s very valuable to us. You look at testing laboratories in California — do we have enough testing labs and what did the other states go through and how did they roll that out. Different states did it differently, some of them rolled it out incrementally. We look at how everyone is dealing with some of the other issues. You are just trying to glean as much information as you can from them. Like how they are dealing with their track and trace systems. It’s not just one thing, you want to learn as much as you can. Obviously, our laws are different but there’s a lot of takeaways.
Our statutes our different, we are dealing with a cannabis industry that’s been operating in California for a couple of decades and, geographically, we are so large. The best way to say it is we are not emulating anything exactly but we are taking bits and pieces from all the different states and looking at them and seeing how it fits into the California market. It’s taking those pieces that work for us, whether it be with how they deal with the retailers, to what they are doing with their lab testing. I think we are looking at everything and seeing how it fits in our market and tweaking it based on our situation and statutes.
I always turn to the fact that alcohol is not federally illegal and that’s easy to say when you first walk in. Then you realize how much that you take for granted as far as what the federal government regulates at their level: they do most of the testing, product recipes, and all the label approval is handled at the federal level. All of that falls on the state now because there is nobody doing that so that really increases the state’s responsibilities — regulating and making sure it’s safe for consumers. There are all sorts of things when it comes to everything from worker safety to pesticides — all of that is the responsibility of the state. It’s no little thing.
When I came into this, I was open to anything. I was there just to learn and soak it in. I actually think that helped me — not coming from cannabis. Not necessarily having any experience in any part of the industry, I think that was helpful to be very objective and not have any opinions on it at all. I came from a place where I understood regulations and how to regulate a product. It was nice to bring what really works for us as an alcohol regulator and maybe some things that didn’t quite work as well. I think it’s nice to be able to have the perspective of having that regulatory experience too. I was a blank slate at the beginning and I felt like ‘wow, I don’t know anything’ but I think it really was the best way to come in. But I don’t think I knew that at the time. It was a steep learning curve. There’s so much I didn’t know and I knew I had to learn it quickly.
Not necessarily the industry itself, but I think right now what’s frustrating everybody, including you folks over there, is probably the banking part of it. It’s tough as a state to come up with a solution that’s going to work for the state, for the regulators, for the industry. I think probably the hardest part is the people you are licensing are going to be mainly dealing in cash and having to regulate that and not being able to really find a long-term solution. That’s a tough one because that’s not really in our control. Being federally illegal really does hamper the states a lot. It’s tough for a workaround. It’s a little tougher here because the state’s so big. Where we are able to take cash and where people have to travel becomes magnified when we have such a geographically large state. Then it’s a public safety issue and, of course, we would like to minimize that.
I will say this, we do have some federal guidelines still out there with the Cole Memo. We are making sure as we set up our regulatory system that we are trying to abide by all of that. Obviously because it’s illegal, they don’t have a lot of federal regulations in place. I do think it makes it challenging. You aren’t partnering with the federal government. We don’t know what’s going to happen. You have an industry with every right to be worried about getting licensed with the state and what’s going to happen if the federal government were to come in. I think that is always going to make it a challenge for us at the state level. The success of our program depends on getting these folks in the regulated market. You want them to have confidence that they can come into the regulated market and not suffer for that. We need to get them in the regulated market and keep them there and that causes worry for folks.
Our biggest consideration is that we have so many people out there already operating and have been operating and don’t want them all to come to a screeching halt on January 1st. Some of them are operating legally through their local jurisdiction. In the state of California, you have to have local approval before we can even give you a state license so you don’t want all that to come to a screeching halt. You want people to be able to continue operating so that means we have to issue licenses so we are looking at issuing temporary licenses. We have that in our statute, SB 94, that was just passed in late June. It repealed the Medical Cannabis Regulation and Safety Act and it’s amended Prop. 64 which gives us the ability to issue temporary licenses and let them operate for four months to give us time to vet their permanent license application.
For us, it’s having our IT system in place to accept those applications before January 1st of 2018 and vet them for the temporary license and make sure they have local approval and have licenses across the state and across the supply chain. There’s going to be bumps but we will need to keep things in transition. We don’t want to put people in an immediate disadvantage on January 2nd so nobody has a license so nobody can sell, distribute or any of that. That’s a challenge in this big state. We are really being very strategic by accepting applications ahead of time. So, we know where people are and whose applying, we can make sure we have enough testing labs across the state. You want the product to go through the supply chain and get to the retail market so there’s product there. You don’t want your patients not to have cannabis that they can legally obtain. That’s the challenge for this state.
We are still finalizing our regulations so we haven’t opened up any licensing yet, it will likely happen in early December. We are also having to do an environmental impact study that we are finishing up and that will have to be completed before our regulations can be finalized. Since the new law passed at the end of June we can’t go through the regular rulemaking process. As far as the testing labs, we have some really strict requirements such as they will have to be ISO-certified and whatnot. We are looking at having provisional licenses for them while they are going through the ISO certification because that can take many months to get so that they can be up and running on day one. We have tried to put in our regulations and implement some strategies to get people up and running and give them some runway to transition. We are still trying to figure some of those pieces out as it relates to testing and track and trace. It’s very hard, especially here with people out there already operating to just flip a switch and everybody is complying with the regulations. We want to be responsible too. I don’t think the public wants us to issue a bunch of licenses without properly vetting them and that’s where those temporary licenses are really going to come into play. It’s that period of time that gives us time to do our investigation because we also want to do responsible licensing. We have a statutory mandate but we also want a quality product and to do responsible licensing, it’s accomplishing all those things at once. It’s intense. Staffing is another big issue. That tends to be a challenge in the civil service process.
I am very surprised at how open the industry in California has been with us as the regulators. Telling us about how they do things like their operations, I was sort of surprised about that. I think that’s pretty brave that they let us in, show us how they are doing things, and how they operate, which has been really important for us to really see how these folks are operating and how they have been doing it for many years. The number of people who have really embraced the legislation and the statute and knowing that regulation costs money and it’s not going to be the same, yet they are still very supportive and excited about this being a legal market. I think it’s been really incredible. People want to tell their story which has been really good for me to hear their stories and find out about what they went through and how it was 20 years ago.