Profit Is Allowed Under California Law
In a Recent Letter, the Originator of SB 420 Clarifies that Medical Cannabis Providers Can Make a Profit.
There is a widely held miss-perception that businesses in the California medical cannabis industry are prohibited from making a profit.Â In reality, no California law prohibits cannabis-related businesses from making a profit.
Opponents of medical cannabis, however, have done a masterful job of spreading disinformation since SB 420 was signed into law in 2003.Â That disinformation has become so prevalent that it is affecting safe access to medical cannabis by patients around the state and has prompted retired state Senator John Vasconcellos to release a letter debunking the widely held misinterpretation that profit is not permitted for medical cannabis providers under California law.
Sen. Vasconcellos co-chaired Attorney General Bill Lockyerâ€™s Medical Marijuana Task Force that drafted what eventually became SB 420, which was passed by the California Legislature in 2003.
As stated in his letter, Sen. Vasconcellos is â€œdeeply concerned that in the nine years since we passed SB 420, certain people have evidently been advocating a marked misinterpretation of . . . SB 420 – with regard to whether â€˜making a profitâ€™ is somehow not permitted for medical cannabis providers under state law.â€
The confusion stems from a passage in SB 420, codified at Section 11362.765(a) of the Health and Safety Code, stating as follows:Â â€œ. . . nor shall anything in this section authorize any individual or group to cultivate or distribute marijuana for profit.â€
Sen. Vasconcellos denotes a self-evident fact about the language quoted above, namely, â€œNothing in that section prohibits profit.Â Nothing in that section explicitly authorizes profit either.Â But I must point out that nobody is required to obtain an â€˜authorizationâ€™ from the Legislature to make a profit in California.â€
In the most direct terms possible, his letter states that SB 420â€™s â€œlanguage does not in any respect purport to prohibit profit — if that had been the intent, the language would have so stated clearly.Â It obviously does no such thing.â€
This misinterpretation arose because the words in SB 420 were â€œthe result of intensive and laborious compromise and consensus.â€Â The issue of profit in the California medical cannabis industry was one over which opinions differed on the Task Force.Â â€œAlthough certain members of our Task Force did advocate for a prohibition on profit-making, that position was firmly rejected by the Task Forceâ€ in favor of the compromise language used in the bill.
The problem is that opponents of medical cannabis, for reasons of their own (having nothing whatsoever to do with the safety or efficacy of cannabis), having not achieved their goal in the language of SB 420, instead spread disinformation as a way to try to make it more difficult for California patients to get access to medicine.Â Sen. Vasconcellosâ€™ letter is an attempt to overcome that propaganda.
As with many aspects of Californiaâ€™s medical cannabis law, there will be no definitive resolution of an issue until the California Supreme Court directly decides it.Â For the foregoing reasons, I expect the Court to concur with Sen. Vasconcellosâ€™ analysis if the question ever reaches the Court.Â In addition, a few local ordinances do purport to prohibit profit or â€œexcessive profitâ€ by cannabis providers, but those provisions are of questionable legality under our state Constitution, and under any circumstance, they have no relevance to the statewide applicability of SB 420.
There may be many good reasons for cannabis providers to operate on a nonprofit or not-for-profit basis, but adherence to California law is not necessarily one of them.Â For example, a cannabis provider may feel it can enhance its image by portraying itself as a not-for-profit entity, but that consideration is a public relations issue, not a legal imperative.
Robert A. Raich specializes in medical cannabis law.Â He is the attorney who took both of the medical cannabis cases to the United States Supreme Court.Â He served on the Attorney Generalâ€™s Medical Marijuana Task Force, where he was Chairman of the Caregiver Issues Subcommittee and was a member of the SB 420 Drafting Subcommittee.Â His website is www.robertraich.com.