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California regulatory reversal: New marijuana delivery rules highlight Eaze’s political pull

New cannabis rules in California released Tuesday highlight again how fractious the state’s industry remains.

The regulations also put the spotlight on the political influence wielded by a technology company that isn’t governed by the rules it has been lobbying to change.

Several cannabis industry insiders say the updated regulations – issued by the state Bureau of Cannabis Control – favor a business model championed by Eaze, which runs a website and smartphone app through which consumers can place delivery orders for cannabis.

But unlike cannabis delivery companies and retailers, Eaze isn’t required to possess state permits because orders placed with the firm are filled by licensed retailers. That situation has turned the business into a divisive flashpoint for many licensed companies that have had to deal with the red tape and costs of obtaining state permits.

At the center of the storm is the Bureau of Cannabis Control’s rules in Section 5418, which was intended to clarify last year’s emergency regulations prohibiting the so-called “ice cream truck” model of delivery, industry insiders said.The new rules are also an about-face from May 18 regulations, some industry insiders say, indicating that Eaze has significant political pull with state officials who are overseeing the rulemaking process.

But the updated regulations announced Tuesday appear to allow that model, a move that would permit delivery companies to operate roving trucks that are stocked like a retail store and fill orders as they are placed online.

It’s important to note the regulations are far from finished. A first draft of the final rules is expected in coming months, and the state is required to finalize the rulemaking process by the end of the year.

That likely means more political maneuvering by stakeholders.

The critics

The new regulations – published on the Office of Administrative Law’s website – are “a 180-degree turn from where it was previously,” said Steven Domingo, the CEO and founder of WeDrop, a cannabis delivery company.

Domingo, along with several other industry groups and individuals, sent a letter to the Bureau last month expressing support for the May 18 regulations.

Other signatories included:

  • California Cannabis Delivery Alliance
  • Bay Area Delivery Alliance
  • Los Angeles Delivery Alliance
  • California Cannabis Couriers Association
  • San Diego Cannabis Delivery Alliance

“In previous discussions (with regulators),” Domingo said, “it was said the intention of the regulation was to be prepackaged orders from the point of origin to the point of sale, but now, (Section) 5418 has completely removed all of those requirements.

“It actually explicitly says you’re only required to have one designated order, and you can carry up to $10,000 worth of product. So if that’s a $60 order, you can have $9,940 worth of loose product in your car, which is pretty crazy.”

Domingo and others backed the May 18 rules, he said, because they gave more mainstream credibility to MJ delivery and supported what he called “the Amazon model” instead of the “ice cream truck” system. He predicted a multitude of problems if the new rules remain.

Bureau spokesman Alex Traverso declined to comment on the rule change, but Domingo and other industry insiders said the technology company Eaze was the driving force.

They also said Eaze is the biggest beneficiary of Tuesday’s updated delivery rules.

“When it comes down to it, this is all about Eaze. It’s not really helping the industry in general,” said Zachary Pitts, president of the California Cannabis Delivery Alliance.

Now, Domingo said, Eaze can “go to their quote-unquote partner dispensary, take ‘X’ amount of product and continue about their day without having to do the beehive model, where their guys are running in and out.”

The company wouldn’t have been able to function that way if the earlier regulations had remained in place.

“It’s obviously going to be more effective in that manner, if you can do deliveries on the go, and they’re assigning deliveries to that individual’s parameters,” Domingo said. “They’re going to be able to get there in a very short amount of time.”

To Read The Rest Of This Article By John Schroyer on Marijuana Business Daily

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Published: June 6, 2018

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