Cannabis Regulatory Update

Two months in to the legalization of recreational cannabis in Canada, there have been notable changes to the provinces’ approaches and attitudes toward their respective recreational frameworks. In December alone, Ontario and Quebec have seen major regulatory changes with regards to the possession, consumption, sale and cultivation of cannabis products.  As governments work through the reality of legalization, it is expected that these regulations will continue to evolve and change.

Ontario

On Friday, November 14, 2018, the Ontario government announced changes to its licensing process for private cannabis retail stores in the province. Citing the shortage of legal cannabis supply from licensed producers across the country, the provincial government has changed its position on allocation of retail store licences for the initial retail store launch. While it had planned to grant a potentially unlimited number of retail licenses, the Ontario government will instead grant licences in phases. Only 25 licenses to retail stores in Ontario will be granted in the initial phase, beginning on April 1, 2019.

These licenses will be distributed across the Province by region:

  • 5 licences for the Toronto region;
  • 6 licences for the greater GTA including Peel, Halton, York and Durham;
  • 7 licences for western Ontario including London, Niagara and Waterloo;
  • 2 licences for northern Ontario; and
  • 5 licences for eastern Ontario.

The selection of the initial licence recipients will be determined through a lottery system operated by the Alcohol and Gaming Commission of Ontario (“AGCO”), under the oversight of a third-party fairness and transparency monitor.

Applications for retail store licenses were supposed to be available through the AGCO website on December 17, 2018. Now, interested applicants will be asked to submit an expression of interest form online to the AGCO between January 7 to January 9, 2019 which will be then entered into the lottery pool. The draw will be conducted on January 11, 2019, with the results to be made available within 24 hours. The AGCO will provide further guidance on the lottery rules and procedures in the forthcoming weeks.

Quebec

On December 5, 2018, the Quebec government introduced Bill 2, An Act to tighten the regulation of cannabis. If passed, cannabis regulations would be “tightened” through the following proposed restrictions:

  • Raising the minimum legal age required to buy or possess cannabis, or to be admitted to a cannabis retail outlet, from 18 to 21 years old;
  • Prohibiting possession of cannabis on the premises or in the buildings of a college- or university-level educational institution, except for university residences;
  • Prohibiting smoking cannabis on public roads, in enclosed spaces where smoking is currently prohibited, and outdoor places that are open to the public such as parks, playgrounds, sports grounds and the grounds of day camps; and
  • Extending the distance requirement for retail stores of 250 metres from educational institutions to include college-level and university-level educational institutions.

United States of America

There also continues to be important legislative developments occurring outside of Canada. Notably, the 2018 Farm Bill was passed by the U.S. Senate on December 11, 2018 and the U.S. House of Representatives on December 12, 2018, and was signed by the President on December 20, 2018. The Farm Bill is the primary agricultural and food policy tool of the federal government.

The 2018 Farm Bill removes industrial hemp and its extracts from the list of Schedule I drugs as defined by the United States Controlled Substances Act. This effectively removes many restrictions on the hemp industry, including:  

  • Allowing farmers to obtain federal hemp cultivation permits and sell their product across state lines;
  • Allowing farmers to apply for USDA crop insurance and grant programs; and
  • Allowing hemp companies to be listed on U.S. stock exchanges, which previously prohibited companies from engaging in any enterprise that is illegal on a federal level.

Importantly, this opens up the ability to cultivate, process, and research the effects of hemp-derived CBD oil, which has been done in areas with state-legalized cannabis for some time now. This does not however create a free-for-all for hemp-derived products: the production, sale and potential uses will be highly regulated on a state level and federally. FDA restrictions currently remain in place for products containing CBD, regardless of source.

The 2018 Farm Bill creates exciting opportunities for Canadian companies that have experience and expertise in the hemp industry.

The McCarthy Tétrault Cannabis Law Group is always up to date on changes to the legislation and the retail cannabis market. On December 20, 2018, Health Canada released its draft regulations for edible cannabis, cannabis extracts and topical cannabis, and has commenced a two-month consultation period. Look out for our upcoming review of these regulations. We have significant experience in assisting cannabis retailers in Ontario and other provinces, and would be pleased to discuss your next steps.

For more information, contact Ranjeev Dhillon, Rami Chalabi, Jessica Firestone, or Leah Ostler.

Authors