Chronicle

Page 1

Winter 2019

The Central Coast’s newest source for all things Cannabis


EDITORIAL

Erik Chalhoub, Editor 831.761.7353 echalhoub@register-pajaronian.com Brian Williams, Editor 805.466.2585 ext 113 bwilliams@atascaderonews.com

INSIDE Santa Cruz Naturals opens in Pajaro

SC Fairgrounds sets cannabis event policy

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Monterey Cannabis Summit

National marijuana law?

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Tax revenue increasing

San Luis Obispo County cannabis regulation

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Cannabis Fast Stats

Sungrown Wellness

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Ryan Cronk, Editor 831.385.4880 rcronk@southcountynewspapers.com

PRODUCTION Rob Chalhoub rchalhoub@register-pajaronian.com Mike Lyon mlyon@register-pajaronian.com

ADVERTISING & MARKETING SANTA CLARA & SANTA CRUZ COUNTIES Tina Chavez, Marketing Director 831.761.7359 tchavez@register-pajaronian.com Jazmine Ancira, Marketing Associate 831.761.7326 jancira@register-pajaronian.com

MONTEREY COUNTY Sheryl Bailey, Marketing Associate 831.385.4880 sbailey@southcountynewspapers.com

SAN LUIS OBISPO, SANTA BARBARA, VENTURA COUNTIES Sheri Potruch, Marketing Associate 805.237.6060 ext 1127 spotruch@pasoroblespress.com Chronicle is a free publication distributed quarterly and published by News Media Corporation in conjunction with the Register-Pajaronian, South County Newspapers, Paso Robles Press and Atascadero News. Questions about this product? Contact Jeanie Johnson, 831.761.7307

Adriana Novack, Marketing Associate 805.466.2585 ext 1115 anovack@atascaderonews.com



PAJARO’S FIRST MARIJUANA DISPENSARY OPENS By TODD GUILD PAJARO — Nearly one decade ago, Colin Disheroon established Santa Cruz Naturals, a small collective with a simple mission: selling medical marijuana to sick people who needed it. The thriving Aptos business — along with dispensaries throughout California — was reinvigorated in 2016 when voters approved Proposition 64, legalizing the plant for recreational use. In this brave new world of cannabis, adults can stroll into dispensaries and browse among several different strains of marijuana, and shop for cannabis-related products such as tinctures, oils and food products. On Jan. 19, Santa Cruz Naturals heralded in its second location in Pajaro with a grand opening celebration that included food, music and visits by elected

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officials. The business is the first of its kind in the Pajaro Valley. Zoned for medical use, the building at 19 San Juan Road was originally designed for Salud Para la Gente, which never occupied it. The building then sat empty for 15 years until Disheroon, looking for a Watsonville location, realized the medical zoning worked perfectly for the business. “I’ve worked on this for three years,” he said. Disheroon’s friend, designer Aaron Porter, took his inspiration from living in Guadalajara, Mexico to create what he calls a “modern Mexican” style. This will eventually include a mural depicting Cesar Chavez, John Steinbeck and the Ohlone people who once populated the coastal regions. All of these, Disheroon said, are a nod to the people and cultures that shaped the Pajaro Valley. “We’re really trying to embrace the community,” he

said. Customers of the Pajaro location will pass through a metal detector and then check in at the front desk, where they provide identification and sign a waiver. After that, a “bud tender” brings the customers into the locked salesroom, a brightly lit place highlighted by custom woodwork. Once inside, the client can choose from variations of the plant that purportedly induce sleep, or perhaps one that offers a euphoric experience. In either case — or if they are perhaps seeking something to help with pain — the surprisingly well-informed employees can help. Customers will eventually be able to order their products online and pick them up at a window. While Prop. 64 has super-charged California’s marijuana industry and largely brought it out of the shadows, customers at the same time are facing local governments that see the sales as a cash cow for tax


Watsonville City Councilman Felipe Hernandez (holding scissors) cuts the ribbon to celebrate the grand opening of Santa Cruz Naturals’ Pajaro location on Jan. 19. Joining him, among others, were Santa Cruz Naturals owner Colin Disharoon (left) and Monterey County Supervisor Luis Alejo (third from left). -Contributed photo

Roberto Matadamas of Santa Cruz Signs installs a logo on the front door of Santa Cruz Naturals at 19 San Juan Road. -Photo

by Tarmo Hannula

revenue. Santa Cruz County customers pay 7 percent, while those in Monterey County pay 5 percent. That number is soon set to increase to 10 percent, Disheroon said. “If the county increases that further it just puts more pressure on the client,” he said. “And we’re trying to attract business away from the black market. Raising taxes is always a deterrent.” A fluent Spanish speaker, Disheroon hired a staff that can speak the language and created bilingual menus and signage. In creating the Pajaro business, Disheroon said he hoped to serve the community that includes Latino, Croatian, Filipino, Portuguese and Japanese people. “Legalized cannabis appeals more to older, conservative Latinos — many of whom are immigrants — who’ve spent their lives being worried that getting caught with medical marijuana could result in arrest, loss of jobs or even possibly deportation.” Disheroon said. “Now there’s safe access in their neighborhood.” •••

For information, call (831) 722-2018 or visit santacruzcannabis.com.

Winter 2019 •

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First Ever Monterey Cannabis Summit Longtime cannabis expert keynotes first summit MONTEREY — The Monterey County Cannabis Industry Association hosted the 2018 Monterey Cannabis Summit in December, featuring long-time cannabis industry expert Andrew DeAngelo, cofounder of Harborside and director of operations, and Cheryl Shuman, media personality and cannabis expert, as keynote speakers. DeAngelo oversees the daily functions of the nation’s largest medical and adultuse cannabis dispensary in Oakland. He also leads the daily operations of its San Jose location. In addition, DeAngelo supports Harborside Farms and FLRish, Inc., where he manages vertical integration of the Harborside supply chain and additional retail locations in California. Harborside has served more than one million unique visitors and over $300 million in gross cannabis sales over the last 12 years. An activist in the medical cannabis reform movement for more than 30 years, DeAngelo was instrumental in passing both Proposition 215 and Proposition 64, which legalized medical and adult-use cannabis, respectively, in California. He co-starred with his brother in the series, “Weed Wars,” on the Discovery Channel

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in 2011. He also currently serves on the board of directors of California Cannabis Industry Association (CCIA). “I’m honored to be invited to be a keynote speaker at the first ever Monterey Cannabis Summit in the heart of one of the world’s most prolific agriculture regions,” DeAngelo said. “It is important to bring together all aspect of the cannabis industry to look at where the industry has been and where it’s headed.” Shuman built the largest cannabis media source in the world with Kush Magazine in 2010 as Director of Celebrity, Media & Public Relations, taking them from $150,000 in gross revenues to more than $6.5 million in revenue within 18 months. Known as the “Martha Stewart of Marijuana,” Shuman is now the senior advisor of a $100 million funding facility to invest in the cannabis sector as well as a personal endorsement contracts with ancillary products in the cannabis industry. “As a female pioneer of the cannabis industry since 1992, it’s exciting to participate in the first-ever Monterey Cannabis Summit located in one of the most productive agricultural regions Andrew DeAngelo, co-founder of Harborside and director of operations, was the keynote speaker at the 2018 Monterey Cannabis Summit.

-Contributed photo


in the country, where they are pioneering a new type of crop,” Shuman said. “I’ve worked literally all over the world evaluating cannabis businesses and agriculture. Monterey, California is both incredibly beautiful and by far the leader of quality products.” The two-day summit, billed as the first of its kind on the Central Coast, brought together the knowledge and expertise of cannabis professionals and business and community partners in California’s fastest growing region in the cannabis industry. “We are thrilled to have the kind of experience and deep history in cannabis as an entrepreneur like Andrew DeAngelo,” said MCCIA’s Executive Director John Arriaga. “His knowledge of what it takes to build and launch the largest cannabis dispensary in the nation is invaluable to our attendees. Andrew is a true trailblazer in the cannabis industry.” The two-day summit featured a cannabis tour for early registrants, keynote speakers, and five workshops delving into the most pressing cannabis issues facing the state and the region. Cheryl Shuman -Contributed

Penalty lifted from cannabis industry CALIFORNIA — Assembly Bill 1741, authored by Assemblymember Rob Bonta (D-Oakland) and signed by Gov. Jerry Brown, removed a fee levied on cannabis businesses that pay the taxes they owe using cash. “Now that California is establishing a regulatory system for the influx of businesses into the cannabis industry, we need to do everything we can to encourage tax compliance in this billion dollar industry,” said Vice Chair of the California State Board of Equalization Fiona Ma, CPA and co-sponsor of AB 1741. “It’s unfair to penalize cannabis businesses for their lack of access to banks. Assembly Bill 1741 is a step forward for this industry while we continue to find a path for California’s cannabis businesses to get access to financial institutions.” “I want to thank Gov. Brown for signing my AB 1741 into law,” Bonta said. “AB 1741 will create equity for taxpayers within the cannabis industry by removing an unfair penalty on cash tax payments made to the state. The new law will further incentivize the cannabis industry to legally comply with California’s tax code, which in turn will generate more tax revenue and further stimulate California’s economy.” Before the Governor signed AB 1741, the law required businesses that have monthly sales, use, cultivation and excise tax payments averaging $10,000 or more to submit their payments using electronic fund transfers. If they didn’t do so, penalties were imposed. The Legislature passed AB 821 in 2016, which removed the 10 percent fee on all non-electronic funds transfer (non-EFT) payments over $10,000; however, AB 821 only applied to sales and use taxes on medical cannabis. AB 1741 removes the 10 percent fee on non-EFT payments over $10,000 for cultivation and excise taxes on medical and adult-use cannabis, creating equity for the taxpayers in this industry. The bill further incentivizes the cannabis industry to legally comply with California’s tax code. -Contributed article

photo

Cannabis tax revenue increases in 2nd quarter of 2018 Rise shows compliance trend growing CALIFORNIA — The California Department of Tax and Fee Administration (CDTFA) has released revenue numbers for cannabis sales for the second quarter of 2018. Tax revenue from the cannabis industry totaled $74.2 million from April 1 through June 30, which includes state cultivation, excise and sales taxes. It does not include tax revenue collected by each jurisdiction. California’s excise tax on cannabis generated $43.5 million in revenue during the second quarter of calendar year 2018. The cultivation tax generated $4.5 million and the sales tax generated $26.3 million in revenue. Medicinal cannabis is exempt from sales tax if the purchaser holds a valid Medical Marijuana Identification card. The revenue from first quarter 2018 was $60.9 million, which included $32 million in excise tax, $1.6 million cultivation tax and $27.3 million in sales tax. To better serve taxpayers, CDTFA has opened a new satellite location to accommodate tax and fee payers in and around Humboldt County, created a cannabis external tax advisory group, introduced a new pilot project in which the Statewide Compliance and Outreach Program (SCOP) teams visit known cannabis retailers to educate and assist them in complying with their tax obligations, and implemented improved procedures and security measures for financial transactions. In November 2016, California voters approved Proposition 64, the Control, Regulate and Tax Adult Use of Marijuana Act. Beginning Jan. 1, 2018, two new cannabis taxes went into effect: a cultivation tax on all harvested cannabis that enters the commercial market and a 15 percent excise tax on the purchase of cannabis and cannabis products. In addition, cannabis and cannabis products are subject to state and local sales tax at the time of retail sale. -Contributed article

Winter 2019 •

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5.3 MILLION

Number of cannabis plants eradicated by the DEAin 2016.

4.3 MILLION

Number of cannabis plants eradicated by the DEAin 2015. Source: DEA

Source: DEA

FAST STATS $30 BILLION Estimated (projected) retail sales marijuana in all markets in 2021. Source: GreenWave Advisors

250%

25%

28.5%

Growth in the number of people aged 65 and up who said they consumed cannabis between 2006 and 2013.

of cancer patients in states that allow medical cannabis use marijuana to treat their symptoms.

of cannabis consumers purchased cannabis to have a good time with friends and/or family in Summer 2017.

Source: National Survey on Drug Use and Health

Source: American Cancer Society

Source: Consumer Research Around Cannabis

$108.6 MILLION

Funding from cannabis sales going to school marijuana prevention and health care programs in Colorado.

Estimated number of arrests made nationwide for cannabis offenses in 2016.

Cannabis taxes collected in Oregon between Jan. 4, 2016, and Aug. 31, 2017, of which $99 million will be divided between the public school fund, mental health and addiction services, state police and the state’s health authority.

Source: Denver Post

Source: FBI Crime in United States (CIUS) report

Source: Oregon Department of Revenue

$9.2 MILLION

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653,249

47.2%

of cannabis consumers purchased cannabis to help them sleep in Summer 2017. Source: Consumer Research Around Cannabis


Fairgrounds sets cannabis event policy By ERIK CHALHOUB WATSONVILLE — The Santa Cruz County Fairgrounds Board of Directors approved a policy Jan. 8 to allow up to four cannabisrelated events at the fairgrounds annually. The move follows an Aug. 28 decision by the Santa Cruz County Board of Supervisors, which approved a plan to allow the events at the fairgrounds, along with a set of regulations governing the events. Under the regulations, event promoters must agree on a contract with the 14th District Agricultural Association. Then, they must seek approval by the County of Santa Cruz, as well as receive a temporary event license from the California State Bureau of Cannabis Control. Among the lengthy lists of regulations, distribution of free cannabis samples is prohibited at the events, and all exhibitors and vendors must pay taxes on any sales from the event, such as the County Cannabis Business Tax. The new regulations on marijuana events came after organizers for Dreamsesh — which was held in April at the fairgrounds — ran the event without authorization or knowledge of the county’s Cannabis Licensing Office, according to then-Cannabis Licensing Manager Robin Bolster-Grant. Santa Cruz County Fair CEO Dave Kegebein said he is seeking clarification from the state if the fairgrounds can run a cannabis event itself.

Bags brimming with buds were a common sight at Dreamsesh at the Santa Cruz County Fairgrounds in April 2018. -Photo by Todd Guild In the meantime, the fairgrounds is looking for proposals from third party vendors who are interested in running cannabis events on the grounds. “The RFP [Request for Proposal] will be sent to

a limited field of experienced promoters to see who’s got the right package,” Kegebein said. Proposed dates for the events are April 5-7, July 26-28 and Oct. 25-27.

Why a national marijuana law could be closer to reality in 2019 So far, the task of loosening marijuana laws has been left to individual states to implement. But that changed when the Democrats won control of the House of Representatives in November. “The states have been carrying the water for the pro-marijuana forces for several years but that may finally start to change,” said Sarah Lee Gossett Parrish, a cannabis industry lawyer. “The federal government is about to get involved in a big way. Uniform national marijuana laws are certainly now on the table.” Oregon Rep. Earl Blumenauer (D-OR) has already laid out a blueprint to advance national marijuana legislation. His strategy would include starting to move the 37 bills currently unable to make it to the House floor under Republicans onto committee schedules, for hearings and proposed legislation. Here are some of the House committees that could be looking at marijuana issues and what they would be considering:

• The House Judiciary Committee. Rep. Blumenauer wants the House to “deschedule” marijuana. It is currently labeled a “Schedule 1” drug, the most tightly restricted category reserved for drugs that have “no currently accepted medical use.” Cannabis advocates have been trying to change that classification since 1972. • House Veterans Affairs Committee. Hearings may be held on proposed legislation to give veterans access to medical marijuana. • House Financial Services Committee. The focus would be on banking changes. Right now, cannabis businesses are unable to use banks, causing them to be an all-cash business, which makes them more susceptible to robberies and violence. There are many other advantages for cannabis producers if they could have access to banking institutions. Further optimism about the future of passing national marijuana laws is due to two major

roadblocks being removed. Attorney General Jeff Sessions was fired by President Donald Trump and Texas Rep. Pete Sessions was defeated by Democrat Colin Allred. Although Jeff Sessions had more of a national profile, Rep. Pete Sessions was arguably more important for pro-marijuana forces to remove since he was chairman of the powerful House Rules Committee. He has been credited with keeping almost all marijuana legislation from reaching the floor of Congress for a vote. “No marijuana bill could get a floor vote under Representative Sessions,” Parrish said. “He was probably the biggest legislative roadblock to comprehensive national marijuana legislation. Now that he is gone, there is a lot of optimism that many of these bills may finally get a vote.” -Contributed article

Winter 2019 •

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Central Coast Cannabis News SLO Board grapples with another round of cannabis regulation

Sungrown Wellness hopes for mid-2019 reopening

By CAMAS FRANK

By CAMAS FRANK

The San Luis Obispo County Board of Supervisors meeting on Dec. 11 heard from neighbors of a proposed marijuana cultivation facility near York Mountain in the Templeton-area. “Cannabis isn’t going anywhere now, so where’s it going in five to 10 years?” asked San Luis Obispo County Supervisor Adam Hill. “You look at the wine industry to see how that’s going to develop in the cannabis industry.” While the York Mountain site has already been approved and is now pending appeal with the board in the New Year, the items before the board were more focused on bringing local regulation into compliance with state law, a situation which board members acknowledged was a tricky position for would-be cultivators attempting to navigate separate layers of statute. The process adopted by the board in two separate resolutions is designed to allow 32 registered cultivation sites to continue until they’ve completed the California Environmental Quality Act review and comply with law taking effect in 2019. In April 2019, staff explained, the state will alter how it processes applications and in SLO County there is in effect a cap on how many businesses will be considered. The first phase of refined legal definitions and policy tweaks staff presented to the board has been wending its way through the lower levels of review for months with planning commission hearings extended through Nov. 8, Nov. 16 and Nov. 19. While public commenters preferred to discuss the overall pros and cons of the industry as a whole since the particular site they were most concerned with was not actually on the agenda, the revisions address specific issues in existing regulation including: • What constitutes the Cannabis Canopy, the designated area at a site that will contain mature plants at any point in time. • Regulations on the use of temporary Cannabis Hoop Structures, the plastic or fabric covered structure prohibited from having permanent anchors or foundation. • Definitions of a Cannabis Nursery, the actual site that produces clones, immature plants and seeds. • Revisions as to what constitutes a “site vs. operation,” important as new classifications of operation are being introduced. • Transport facilities as a new licensing category which may directly not own or sell cannabis or cannabis products, or store cannabis or cannabis products at the premises of the business. • Cannabis Processing Facilities, as a new cannabis activity exclusively for the drying, curing, grading, trimming, rolling, storing, packaging and labeling of non-manufactured cannabis products, requiring a state Processor license. Also looked at were requirements in the name of public safety, including screening and outdoor lighting which is simultaneously a need and a concern in that it’s problematic as part of an existing rural neighborhood. County staff also recommended adoption of a mandatory countyrun monitoring system for all businesses engaged in cannabis activities, not just those established under earlier iterations of medical marijuana and later recreational use ordinances. While board members joked that they were giving their director of the County Department of Planning and Building, Trevor Keith, a headache in parsing the language suggested, he reassured them that phase two implementation would be smoother in 2019.

SANTA MARGARITA — In October 2018, the San Luis Obispo County Planning Commission approved a permit for a cannabis distribution facility and mobile delivery dispensary on El Camino Real in Santa Margarita near Highway 58. At the time, said Sommer Shahan, co-owner of Sungrown Wellness Inc., the main block to reopening what had been a functioning nonprofit delivering medicinal cannabis to local clients was the application process for a California State license under a newly-approved business model. In January 2019 they now have that license, and a location in unincorporated San Luis Obispo County, but they’re prevented from opening just yet as County Planning and Building approval processes are now taking the lion’s share of their efforts and funding. The site is a formerly abandoned commercial building which Sungrown has cleaned up since taking possession in March 2018, which was also once a real estate office. One of the surprises in the last round of checks was that they were required to dig up the property’s septic tank access to verify that it was there, an expensive test that has its place in the county’s due diligence, but Shahan felt was likely unnecessary. “I don’t think we’d have this much trouble opening an ice cream shop,” she said, noting that a mobile dispensary — administering the business and storing materials on site but sending product out to clients without customers coming inside — would have less impact on something like the septic system than the property’s previous uses. There are also extensive Americans with Disabilities Act renovations which have a very specific set of checklists. In short, it’s a frustrating position to be in as the dispensary marks a year since they shut down as a functioning, and legal, service operating under old guidelines to embrace the state and county’s new way to do things. “I also don’t want to sound like we’re actually upset with the county. They [San Luis Obispo County employees] have been very helpful, but I think they’re asking for a lot because they’re worried,” she said. “We’re just trying to offer delivery out of Santa Maria with no other distribution. The county is working for everyone and they just don’t want to be sued.” Expected hoops this brand of business jumps through, which an ice cream shop does not, include: an odor control plan, utilizing activated carbon filtration; a plan to replace and/or enhance the fence that surrounds the property; upgraded fencing and gates that are not clearly visible from El Camino Real; and no signage beyond a tasteful (according to the Santa Margarita Area design plan) address numbering which is clear from the road. Hours of operation would be 8 a.m. to 8 p.m. seven days a week. At the conditional approval phase of the hearing in October, no neighbors came out to complain about those hours or measures. The tentative hope would be that the dispensary will be ready to reopen with all the checklists marked off by June. “There is no official type of banking for this business,” Shahan said, so all money spent on getting the site ready is coming out of the past funds raised while operating under a different license, or from investors who are betting on the venture’s success. An Atascadero resident, Shahan added that she’d personally rather deal with the business climate and planning and building departments of her hometown, but there is currently a flat ban on these operations inside city limits. “It’s a discussion we’d like to have with the [newly elected mayor and city council],” Shahan said.

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Insurance commissioner announces new workers’ compensation program for California’s cannabis industry Contributed article

CALIFORNIA — Insurance Commissioner Dave Jones has announced a new workers’ compensation insurance program for California’s cannabis industry. The program was created by Atlas General Insurance Services to serve businesses and workers in the cannabis industry. “Cannabis businesses should have insurance coverage available to them just like any other California business,” Jones said. “As Insurance Commissioner, my mission is insurance protection for all Californians, which includes insurance for California’s legalized cannabis businesses and its workers. This new program from Atlas is a crucial step in the right direction for this evolving industry. I encourage more insurance companies to offer cannabis business insurance products with the department to meet the needs of this emerging market.” This program can accommodate workers’ compensation risks involved in all aspects of the cannabis industry, including growers, extractors, analytical labs, medicine manufacturers, food and beverage products manufacturing, packaging, warehousing and distribution, transportation and dispensaries. Atlas provides all of the distribution and underwriting as well as the carrier backroom functions on behalf of Accredited Surety and Casualty. The program will be rolled out to over 1,700 Atlas appointed agents in California and another 4,000 agents in the other states with legal cannabis operations. “Atlas has been studying the cannabis industry well before it became legalized in California,” said Bill Trzos, CEO of Atlas General Insurance Services. “Through our research we recognized the opportunity to be proactive in entering the cannabis market and are excited to be one of a few work comp platforms in the state.” Jones launched in California an initiative last year to encourage admitted commercial insurance companies to write insurance to fill coverage gaps for the cannabis industry. As a result of Jones’ initiative, in California the first filing and approval of an admitted commercial insurer offering insurance for the cannabis

industry was announced in November 2017, the first surety bond program for the industry was announced in February 2018, the first coverage for commercial landlords for the industry was announced in May 2018, the first standardized cannabis policy forms and program filed by the American Association of Insurance Services was approved in June 2018, and recently three more insurance carriers were approved by Jones to offer surety bond coverage for the cannabis industry in California. Jones has convened meetings between commercial insurance company executives and cannabis business owners to educate the insurance industry about the sophistication, professionalism and risk management of the cannabis industry. Jones has also organized tours for insurance executives at cannabis businesses. In October 2017, Jones held a first-in-the-nation public hearing to identify insurance gaps faced by the cannabis industry. Cannabis businesses and insurance industry representatives testified about the limited availability of insurance for cannabis businesses. The hearing revealed that while there is insurance available from surplus lines insurers, insurance gaps in coverage remain, and, until the approval announced last November, no admitted insurance carriers were offering insurance products to cannabis businesses. Jones also announced that he has directed Department staff to devote the resources necessary to timely review the cannabis product and rate filings. In August, Jones was appointed chair of the newly established National Association of Insurance Commissioners Cannabis Insurance Working Group. In May, he hosted a webinar titled “Weeding through the Unique Insurance Needs of the Cannabis Industry” with the NAIC Center for Insurance Policy and Research. In April, Jones renewed his call for insurers to offer insurance products for California’s legalized cannabis industry in the wake of published reports that President Trump has overruled Attorney General Jeff Sessions’ policy on federal law enforcement against state legalized cannabis. Jones sent a formal letter to California insurers encouraging them to fill insurance gaps for California’s cannabis businesses.


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