Understanding AB 1775: The Future of Cannabis Cafes in California

On September 30, Governor Gavin Newsom signed into law the California Assembly Bill 1775 (AB 1775). The bill amends Section 26200 of the Business and Professions Code and significantly expands the permissible activities for licensed cannabis retailers and microbusinesses. While the California Adult Use of Marijuana Act (AUMA), also known as Proposition 64, passed by voters on November 8, 2016, allowed for limited on-site consumption, AB 1775 represents a groundbreaking shift in the California cannabis landscape by potentially allowing for the establishment of true cannabis cafes and lounges.

Under existing law, cannabis retailers with consumption areas may sell prepackaged food and beverages if authorized by the applicable local jurisdiction. This bill expands that existing authority to include freshly prepared food and drinks consistent with the California Retail Food Code and applicable local requirements.

Key Provisions of AB 1775

On-Site Consumption: Licensed retailers and microbusinesses may permit the consumption of cannabis goods on their premises, subject to meeting specific conditions and local regulatory frameworks.
Food and Beverage Sales: In designated consumption areas, retailers can prepare and sell non-cannabis food and beverages. However, non-cannabis food or beverage products must not be contaminated by or commingled with any cannabis products sold or served on the premises where cannabis consumption is allowed.
Live Entertainment: Licensed retailers and microbusinesses can host and sell tickets for live musicals or other performances in designated consumption areas.
Municipal Authorization: Unless a municipality specifically allows for such cafes, these activities are prohibited within the city limits and require prior approval from local authorities. This is due to California’s explicit laws and regulations providing for a smoke-free workplace.
Temporary Events: Allows for temporary events with food and drinks to be licensed with a state temporary event license.
No Alcohol: No alcoholic beverages may be consumed in a cannabis cafe.
Age Restriction: Access to the area where cannabis consumption is allowed is restricted to persons 21 years of age or older.

Local Regulatory Authority

AB 1775 explicitly grants local jurisdictions the authority to:

Regulate and restrict permissible activities, including on-site consumption, food and beverage sales, and live entertainment.
Establish operating standards for businesses engaged in these newly authorized activities.
Implement permitting processes requiring businesses to obtain local permits before commencing any of the activities permitted under AB 1775.

Conditions for Local Authorization

Before authorizing any of the activities under AB 1775, local jurisdictions must ensure that the following conditions are met:

AUMA Compliance: The retailer or microbusiness must be in full compliance with AUMA.
Zoning Compliance: The proposed activities must adhere to all applicable local zoning ordinances and land use regulations, including restrictions on proximity to schools and other sensitive areas.
Security and Safety: The retailer must implement adequate security measures to prevent underage access, ensure public safety, and safeguard against unlawful activities.
Ventilation: Adequate ventilation systems must be in place to mitigate the potential health effects of secondhand cannabis smoke and ensure a safe environment for employees and patrons. This includes safeguards such as:
- Expressly protecting employees’ discretion to wear a mask for respiration, paid for at the expense of the employer.
- Requiring employees to receive additional guidance on the risks of secondhand cannabis smoke.

Implications for Cannabis Businesses

AB 1775 presents significant opportunities for cannabis retailers to diversify their offerings, enhance customer experiences, and potentially increase revenue streams. However, strict compliance with the legal and regulatory landscape associated with these new activities is crucial.

How ArentFox Schiff Can Help

ArentFox Schiff possesses extensive expertise in cannabis law and regulation. We can assist your business with:

License Applications: Preparing and submitting applications for on-site consumption licenses and local permits.
Regulatory Compliance: Ensuring full compliance with AUMA and all applicable local ordinances, including various real estate, zoning, and permitting regulations.
Zoning and Land Use: Advising on zoning requirements and assisting with obtaining necessary approvals.
Security and Safety Protocols: Developing comprehensive security plans and implementing best practices.
Employment Guidelines: Drafting employment policies consistent with the bill’s protective measures for employees.

ArentFox Schiff’s Cannabis team regularly partners with clients in this rapidly evolving industry to anticipate changes, identify potential issues early, and craft strategic, tailored solutions that help navigate the intricate web of regulations unique to the cannabis sector. For more information, contact one of the authors, a member of our Cannabis team, or the AFS attorney with whom you normally work.

Additional research and writing from Aaron Herzberg, a legal extern in ArentFox Schiff’s Washington, DC office and a Master of Law Taxation student at Georgetown University Law Center.