Cannabis Products, Industrial Hemp Products, and Alcoholic Beverages

With the legalization of commercial recreational use of cannabis products commencing in 2018, along with licensed manufacture and sale, several questions have arisen about what activities are permissible on or in premises licensed by the Department of Alcoholic Beverage Control (“ABC”) to manufacture or sell alcoholic beverages. In 2021, legislation was enacted to establish a framework for the inclusion of industrial hemp derivatives in food, beverages, and other types of products. This legislative change has modified some answers and raised new questions for ABC licensees.

The following frequently asked questions and responses are intended to offer some guidance. These address issues under California State Law and do not address any potential conflicts with Federal Law. This is not intended to be a comprehensive review of what may be permitted or prohibited. You should obtain independent legal advice before engaging in business involving either alcoholic beverages or cannabis, and you should not act in reliance on any information presented herein.

• 1. Can I hold both an ABC license and a license to grow, process, or sell cannabis products?

  Yes. Neither the ABC Act nor the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) prohibit persons holding licenses to manufacture or sell alcoholic beverages from holding a license authorized under the MAUCRSA. Applicants for ABC licenses will still need to meet all ABC licensing requirements, independently of any other licensing authority under the MAUCRSA.

• 2. If I hold licenses under both the ABC Act and the MAUCRSA, can I sell alcoholic beverages and cannabis products at the same location?

  No. The MAUCRSA (Business and Professions Code Section 26054) states that the holder of a license issued under the MAUCRSA “shall not sell alcoholic beverages or tobacco products on or at any premises licensed under this division.” (Note: Section 26038 provides that any person engaging in commercial cannabis activity without a license is in violation of the MAUCRSA and subject to criminal and civil penalties.)

  In addition, Section 15000.3 of the Department of Cannabis Control (“DCC”) regulations provides that a premises shall not be in a location that requires persons to pass through a business that sells alcohol or tobacco or a private residence to access the licensed premises, or that requires persons to pass through the licensed premises to access a business that sells tobacco or alcohol or a private residence. Commercial cannabis products may only be cultivated, processed, stored, or sold at premises licensed pursuant to the MAUCRSA. Due to the restrictions on licensing and permissible activities, premises may not be licensed with both an ABC license and a license issued under MAUCRSA, even though a licensee may hold licenses (at separate premises) under both statutory schemes.

• 3. Although I cannot sell cannabis products in my bar or restaurant licensed by ABC, can I offer it to consumers in other ways, or allow consumers to bring their own cannabis products onto the premises and consume it?

  No. Health and Safety Code Section 11362.3 prohibits the smoking or ingesting of cannabis products in a public place, except as authorized under Business and Professions Code Section 26200. Businesses (including premises authorizing the sale or consumption of alcoholic beverages under both retail and non-retail licenses) licensed under the ABC Act are considered “public places” for this purpose (this also includes premises licensed under club licenses, or any other premises to which entry may otherwise be limited). This restriction applies even if the ABC licensee is not exercising the privileges of the license, such as after hours, while closed, or if the ABC license is surrendered or suspended.

  In addition, ABC considers the possession of cannabis products by licensees or their agents for commercial purposes (including anyone conducting other businesses on licensed premises, such as offering cannabis to smell as part of sensory experiences) to be contrary to the provisions of the ABC Act and the MAUCRSA.

  Although there are exceptions under Business and Professions Code Section 26200 allowing for public consumption of cannabis products, the sale or consumption of alcoholic beverages in the same area is expressly prohibited. (See, also, DCC regulations 15602 regarding temporary cannabis event sales and consumption—the consumption of alcoholic beverages is prohibited on the premises.)

  Legal industrial hemp products are not considered cannabis products (see question 5). However, they cannot be mixed or infused with alcoholic beverages (see question 6).

• 4. I have seen news articles talking about wine, food, and cannabis product pairing events (or similar such activities). Are these types of events allowed?

  Not in a premises licensed under the ABC Act. As indicated above, public consumption of cannabis products are prohibited. Even if one of the exceptions applies, alcoholic beverages are still not allowed to be sold or consumed at the same time when cannabis products are consumed. “Public consumption” is not limited to smoking; it also includes the consumption of edible cannabis products. As such, it would also be a violation for an ABC licensee to use cannabis products in the preparation of food items for consumption on the premises.

• 5. Are industrial hemp products regulated like cannabis products?

  Each are uniquely regulated. The definition of cannabis within Section 26001 of the MAUCRSA expressly does not include industrial hemp. The Department of Cannabis Control is charged with regulating cannabis products while the Department of Food and Agriculture and the Department of Public Health have oversight responsibilities involving industrial hemp products. Thus, industrial hemp products are not considered cannabis products pursuant to California Law and any products manufactured, sold, or consumed are subject to regulation and approval by the Department of Food and Agriculture (“DFA”) and the Department of Public Health (“DPH”). If an industrial hemp product has been approved by DFA and DPH, the restrictions applicable to cannabis products do not apply.

• 6. Can I infuse (or mix) alcoholic beverages with either cannabis products or industrial hemp products (either as a manufacturer or retailer)?

  No. On September 27, 2018, Governor Brown signed Assembly Bill 2914 (enacting Business and Professions Code Section 25621.5), which makes it clear that alcoholic beverage licensees are prohibited from manufacturing, selling, or offering for sale any alcoholic beverages that contain tetrahydrocannabinol or cannabinoids, regardless of source. This means that neither cannabis products nor industrial hemp products (that contain tetrahydrocannabinol or cannabinoids) may be used in the manufacture of alcoholic beverages or in mixed drinks prepared at ABC-licensed premises.

• 7. Am I allowed to sell or use at my ABC-licensed premises industrial hemp products?

  AB 45 (Aguiar-Curry, Chapter 576, Statutes of 2021) established a state framework for the inclusion of industrial hemp derivatives in food, beverages, and other types of products under the direction of DFA and DPH. This law maintains the existing prohibition of including industrial hemp derivatives in alcoholic beverages. If a nonalcoholic beverage or other product containing industrial hemp is manufactured in accordance with the Sherman Food, Drug, and Cosmetic Law, an ABC licensee can sell or use these products on their licensed premises.

  It is the ABC licensee’s responsibility to ensure all products they sell or use are legal industrial hemp products outside the regulatory authority of the DCC. Licensees should also be cautious of representations of legality by manufacturers or distributors of industrial hemp products. It may be prudent to examine packaging and make additional inquiries to verify as best as possible that the products are compliant. For example, DPH maintains a list of industrial hemp businesses that have registered with the Food and Drug Branch for Industrial Hemp Enrollment and Oversight. While this does not mean that individual products are necessarily compliant, it is an available resource to aid in your decision as to whether or not to carry an item.

  Licensees should also be aware that there are specific labeling and marketing restrictions applicable to industrial hemp products. Care should be taken to ensure any products offered for sale meet the necessary requirements. It is also important to note that manufacturers are specifically prohibited from advertising or marketing to children (among others), so packaging or products that might reasonably be considered as attractive to children should be treated with particular caution.

  If an ABC licensee is selling cannabis products requiring a license by the DCC at an ABC licensed premises, this constitutes a violation against the ABC license (see question 2). In addition, no industrial hemp products may be added or infused to alcoholic beverages manufactured, sold, or consumed on the licensed premises as this also constitutes a violation against the ABC license (see question 6).