Opponents take another shot at rolling back California cannabis delivery

The California legislature recently rejected an appeal to overturn the state’s legal delivery laws, but marijuana on-demand is still under threat from a lawsuit filed by the League of California Cities on behalf of 24 municipalities (and Santa Cruz County) against the Bureau of Cannabis Control (BCC), the state’s regulatory agency.

The lawsuit, filed earlier this month, targets a regulation that allows licensed operators to deliver cannabis to cities where brick and mortar stores are banned by local governments.

“The City Council has maintained this is an issue of local control, and that Beverly Hills should have the authority to regulate cannabis,” said Keith Sterling, a spokesperson for the city of Beverly Hills, one of the plaintiffs in the case.

Home delivery has been the subject of several legal and legislative battles since California legalized cannabis in January 2018.

Proposition 64, the legalization ballot initiative, gave cities wide latitude in how they regulated the new industry. Although the largest California cities  – Los Angeles, San Diego and San Francisco  – allow recreational cannabis stores, 80 percent of the state’s municipalities have banned brick and mortar locations. That means residents in vast areas of the state basically have no access to legal marijuana – unless they get it delivered.

In July 2018 the law was modified to allow door-to-door delivery statewide. The cities that had banned stores balked, claiming their prohibition should extend to deliveries. Opponents tried to push through a legislative change, but that effort failed last week.

The current lawsuit comes down to a power play between local governments and state regulators and potentially threatens California’s legal marijuana market, which has been slower to develop than many expected.

“There’s going to be delivery in any case; the question is whether it’s going to be legal or illegal,” said Dale Gieringer, state coordinator for NORML, a nonprofit working to reform marijuana laws. “We think it’s better to allow legal licensed delivery.”

There are currently 311 licensed delivery services in California, a BCC spokesperson said.

Sacramento retailer Maisha Bahati opened her delivery-only business, Crystal Nugs, in March 2019 after the city capped the number of brick and mortar locations. Business is brisk at the female-owned enterprise, which shoots for Amazon-style delivery times of less than an hour.

“We’re getting new clients every day, many have never been to an actual store,” Bahati said. “It’s discreet and professional.”

Crystal Nugs delivers to small cities and unincorporated areas like El Dorado Hills and Rosewood that have prohibited brick and mortar locations. The League of Cities lawsuit, she said, is par for the course in an industry that continues to battle negative perceptions about marijuana, a drug that remains illegal at the federal level.

“The reason they have the lawsuit is they still think marijuana entices crime,” Bahati said.

Many retailers feel existing regulations relating to home delivery are onerous enough. Bahati, for one, spent more than two years and $60,000 to obtain a license and get the business up and running. “It’s a long process, a waiting game,” she said. “And dealing with everything related to cannabis was expensive.”

License fees run anywhere from $2,500 to $96,000 depending on yearly sales, the BCC spokesperson said.

The League of California Cities lawsuit, filed in conservative Fresno County, points to language in Proposition 64 allowing “deliveries of cannabis, but only if such operations comply with local law,” and, “a jurisdiction [can] regulate or completely prohibit the operation of commercial cannabis businesses within its boundaries.”

Home delivery supporters say that Proposition 64 does not allow local governments to ban the transportation of marijuana. They also don’t believe local governments have the authority to prevent delivery of medical marijuana, Gieringer said.

For residents of cities that ban physical stores, delivery is their only option, he said.

“We’ve talked to people who say their nearest dispensary is 150 miles away  – in northeastern California. In some places in the Central Valley it’s very hard to find a dispensary.”

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Linda Baker, Staff Writer

Linda Baker is a FreightWaves staff reporter based in Portland, Oregon. Her beat includes early-stage VC, freight-tech, mobility and West Coast emissions regulations.

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