California acts to regulate pot industry

SAN FRANCISCO — California took a big step Friday toward regulating its legalized pot industry.

Gov. Jerry Brown signed three bills that create a new state agency and develop guidelines for licensing, producing and testing marijuana within the burgeoning industry, his office confirmed.

The potentially lucrative industry has been a lightning rod for wealthy investors and has drawn the financial backing of some of tech's best known and wealthiest founders. Among them is Napster co-founder and Facebook investor Sean Parker.

One of those celebrating Friday was Nate Bradley, the executive director of the California Cannabis Industry Association. While the new laws ostensibly govern medical marijuana, industry players intend to use the language as the foundation for a ballot measure to legalize recreational cannabis. Voters will be asked to decide on this next fall.

"The ones who have the financing are doing a good job working together to get past their differences," said Bradley. "There are lots of strong personalities in the discussion. Nobody has officially has done their own thing."

The Marijuana Policy Project, an advocacy organization based in Washington, applauded Brown's move.

"These regulations will ensure patients have legal, safe and consistent access to marijuana," Lauren Vazquez, the project's deputy director of communications, said in a statement. "New guidelines for testing and labeling products will ensure patients know what they are getting and that it meets appropriate standards for quality."

The legislation Brown passed creates a framework similar to that used to produce, distribute and sell alcohol in California. But some cannabis advocates want to see the state retain more elements of its current medical marijuana system, with its non-profit co-operatives and almost total lack of state oversight.

Many tech investors who see legal cannabis as inevitable support more corporate-friendly regulations, and a structure that includes a relatively small number of privately owned distribution companies and a scalable business model.

Among those pushing the corporate-friendly regulations are Parker, Eddie Miller, the CEO of InvestInCannabis.com, said.

Facebook co-founder Dustin Moskovitz also is passionate about the debate, and donated money back in 2010 to the failed California effort to legalize the leaf.

And Peter Thiel, one of the founders of PayPal, has invested millions through his Founders Fund in Privateer Holdings, the parent company of the Bob Marley-branded marijuana line, Marley Natural.

Parker didn't respond to requests for comment. Moskovitz's current startup, workplace software company Asana, referred a reporter to Moscovitz's philanthropic foundation, Good Ventures, which among many donations this year gave $150,000 in August to the Drug Policy Alliance, which works on issues that include marijuana law reform.

A Buzzfeed News article this week cited unnamed sources in a report that indicated Parker and associates had decided to draft and back their own marijuana law initiative in anticipation of the 2016 vote.

CANNABIS FARMERS

Many longtime cannabis farmers in the state's Emerald Triangle around Mendocino — who don't currently pay taxes or face government scrutiny — generally prefer less regulation and more independence to strike their own deals with stores, Miller said.

California's largely unregulated medical marijuana environment is a testament to the state's sheer size and number of competing interests, said Derek Peterson, the CEO of cannabis company Terra Tech, which operates in both California and Nevada. He said current players have a vested interest in maintaining the status quo for medical marijuana and mirroring that system for recreational pot.

"There's a lot of egos and a lot of capital in medical marijuana. You're seeing the same in recreational marijuana," he said. "We know the voters want it. It's just a matter of getting everybody's interests aligned."

Conflicts amongst advocacy groups are nothing new. But the intersection of money, marijuana and the state's high-profile tech culture is drawing attention.

"Every group has their own opinion, and some groups have pollsters and they rely on those pollsters too much," said Steve Fox, the executive director of the national Council on Responsible Cannabis Regulation.

Fox said the ballot language will also determine whether anyone can grow small amounts of marijuana in their homes, like in Colorado, or if growing will be restricted solely to licensed farmers, as in Washington state. He said polling data shows voter will likely approve whatever they're asked to consider, making the specific language more important.

"Anyone could run the campaign and win," Fox said, "if the language is reasonable."

If the competing groups can't agree on a single version of the proposal to bring to voters, voters might be forced to decide between multiple proposals, which could split support and doom the effort again. Voters in 2010 rejected legalization in California, and now four states — Colorado, Washington, Oregon and Alaska, along with the District of Columbia — have leapfrogged ahead.

"Whoever has more money to spend is going to win," Miller said.

Contributing: Marco della Cava in San Francisco