Why Federal Reform Matters

SPEAKER_01 0:00

I think the federal discussion is positive, right? Because we need to end prohibition to sort of be able to have functional legal markets in this country and really across the world here, because to the extent there aren't functional legal markets, illicit markets will persist.

Hosts Catch Up And Vacation Plans

Ben Larson 0:42

I'm Ben Larson. And I'm Anna Ray Gramstein. And we're recording Tuesday, July 28th, 2026. And we have a great conversation for you today. We have the new DCC director, well, not so new anymore, but new to us, Clint Kellum. Uh super nice guy. Had the opportunity to hang out with him at the Canra conference this year in Oklahoma City. So we're going to catch up on all things California. But before we get there, Anna Ray, different background for you today. Where you where are we at?

AnnaRae Grabstein 1:17

I um I am en route to some nature maxing. Uh, you know, there's all this cool maxing stuff going on, look maxing. Screw that. Um, I'm gearing up for some serious nature maxing, going out of office for a week-long rafting trip off the grid. So I um am actually recording from my parents' house, my childhood home um in San Francisco, which is very close to the airport en route to my next destination in Idaho.

Ben Larson 1:48

Very nice. So uh yeah, heads up to all the listeners. We're off next week, I I guess. Um we are.

AnnaRae Grabstein 1:55

We're taking a taking a vacation. Yeah.

Ben Larson 1:58

Yeah. I'm also going to be in the woods. Uh, I don't know if I'm gonna call it nature maxing, but I'm gonna be close to the woods uh up in up in Sonoma next week. So we'll be uh doing our tree hugging at the same time, just in different locations.

AnnaRae Grabstein 2:11

Yeah, you know, the summer is the time to do it. The kids are out of school, the weather's hot. Um, unfortunately, it seems like it's a little fiery right now. So um if if you know a rain dance, uh please do one for all of the folks in Oregon, Washington, Idaho, Canada. There's fires all over the place. So I'm hoping that the air stays clear for my trip, but I'm really excited about it.

Ben Larson 2:38

Well, good. I I I hope uh the weather gods are with you and that it it all clears up. Um I know we certainly uh know what the fire weather is like here in California, but we've been very fortunate uh this year. So knock on wind. Let's let's hope it stays that way.

AnnaRae Grabstein 2:56

Yeah. And um, how are you doing with the paternity leave? Are you dipping your toe back into work? How's that feeling? Oh, for those that that aren't on video, Ben is rubbing his eyes. He's still tired.

Ben Larson 3:10

I have these new uh bags under my eyes that just are persistent. There's not enough. I'm sure there is there. I'll tell you one thing that caffeine is not the right drug to get rid of the this tiredness. But um besides all that, I have been kind of re-immersing myself into office life uh here and there. And um, yeah, just trying to find my new normal. I'm still um wrangling with like how much of this is just early babyhood and adapting, or how much of this is actually just my new life of having three kids.

AnnaRae Grabstein 3:47

Solid question. Um and while we mostly are not

FDA Signals And Cannabis Uncertainty

AnnaRae Grabstein 3:52

going to do our traditional news roundup because we're just gonna talk about all kinds of news and current events with Clint. Um, just because we we kind of wandered in when I made fun of you about your eye bags and peptides, I do think it's interesting. There's a small piece of news that came out that seems unrelated to cannabis, but I think that there is actually a worthwhile cannabis connection to be made. And that has to do with um the FDA in this past week um pushing forward some what people have considered some sort of controversial peptides through approval that don't have as much research or haven't gone through the regular FDA approval process that historically most medicines have to open the door towards compounding pharmacies and telehealth being able to sell these things. And I think that since this is a cannabis show and we aren't here to talk about longevity peptides, um, although interesting, uh the connection is really that that the FDA has been historically silent on our industry. And there is a lot of discussion kind of behind the scenes and in front of the scenes and in discussions like this about how the FDA is going to get more involved in cannabis. And what I am seeing is an FDA that is um starting to have a different or or broader approach than um historically the FDA always had. And not that not that these peptides are very much like cannabis and that they are single molecules as opposed to cannabis being this full spectrum plant, which seems to be why the FDA has been so confused by it. It's it's just so confusing. Um, but but but either way, I think it's newsworthy and and pretty interesting. I'm following it. Are you paying attention?

Ben Larson 5:42

Yeah, I I I am. And uh they kind of live in two different worlds for me because the way I think about the federal government and the FDA in particular is that you know, when you there's there's two things that the FDA seems to really care about is one, drug-to-drug interactions, which they should, which cannabinoids, because they get how they get processed through the liver and the lymphatic system, um, do have these interactions that that we should be paying attention to. Uh also mind-altering substances. We have recognized that anytime you you work your way into what might be considered an adult product, the federal government really starts to care. And so this has been shown with um with Kratum and other ingredients. It's like, and I I think the whole kind of mood, not mood-altering, mood-enhancing like CPG space really kind of flirts with this line. It's like, oh, let's add some adaptogens, let's add some mushrooms, and and enhance the the human experience. But as soon as you get into that kind of mind-altering state, then the FDA really starts to care. So peptides are really interesting, right? They they kind of are often um exogenous ingredients that the um that the body naturally makes. It's kind of like amplifying them. There isn't often um mind-altering experiences associated with them, nor are there as many drug-to-drug interactions. But the interesting thing here is like apparently the FDA doesn't care about the long-term impacts of of adding all these, you know, external substances too. So it's it's just really bizarre to kind of like this this mind map that it's creating for me about how the federal government, how the FDA thinks about like what we put into our bodies.

AnnaRae Grabstein 7:30

So interesting. And I was I was following very closely the FDA's look at MDMA last year, um, which ultimately did not make it out of its um phase three clinical trials. And a big part, yeah, and a huge issue there had to do with the whole system around double blind um testing, and that when people took MDMA, they felt it. And the people that were taking the placebo knew that they were not on MDMA. No big surprise, right? So it it was it was this problem.

Ben Larson 8:05

It's not gonna bode well for weed.

AnnaRae Grabstein 8:08

So I could see it being the same problem. Um, okay, but we've got this great guest, and people don't want to hear from us. So uh let's uh cue him

Meet DCC Director Clint Kellum

AnnaRae Grabstein 8:17

up. Today, our guest, like you mentioned, is Clint Kellum. He's the director of the California Department of Cannabis Control. Uh, he was previously the department's chief deputy director beginning in January of 2025. Clint has 18 years of public service experience, uh, with most of his career focused in state budgeting, public policy, and organizational leadership. Before joining the DCC, he served as chief deputy executive director of California Infrastructure and Economic Development Bank, also called IBank. Um, these are mouthful acronyms, guys. Um, but there he uh he oversaw statewide finance and economic development initiatives. Um, at the DCC, Clint has led operational execution, cross-departmental coordination on enforcement licensing, public health, policy priorities, and um ultimately leading and supporting the execution of the department at large. So uh we are very excited to welcome Clint today and thank him for his time. Welcome, Clint.

SPEAKER_01 9:21

Thank you. Appreciate it. Excited to be here. Uh, really enjoyed the peptide longevity conversation. So uh some some good good conversation there and looking forward to having some more of you all.

Ben Larson 9:32

Well, either you're taking them or you're you're just young because you look great. You probably don't have a one-month old at home.

SPEAKER_01 9:40

I definitely do not have that. That certainly helps. My kids are seven and eleven, so uh get getting sleep through the night definitely helps.

Ben Larson 9:49

Beautiful.

AnnaRae Grabstein 9:51

So um, before we jump into policy, um, let's lay some groundwork. The DCC was established in July of 2021 after consolidating three separate cannabis licensing programs that were launched after legalization. Um, and those programs had existed since 2016. The DCC is the single department that oversees everything related to cannabis. Um I would love it if you could just set us up by walking us through what a day looks like for you, what you're overseeing today, what the department actually does, and maybe some parts of the job that don't show up in the press releases that you can let our listeners in on.

What DCC Actually Does Daily

SPEAKER_01 10:33

Yeah, um, well, well, thank you. Um the we we span a spectrum of work, right? Um we have the sort of like front-end work that you all would expect: application, paperwork, processing, collection of payments, all of that, right? Um, and then we have field compliance staff doing work, which includes we actually have uh laboratory staff in Richmond, California, um working out of the public health, the bigger public health lab there, um doing our laboratory oversight work as well. Um and then we have a law enforcement team, which is a fully sworn team focused only on the illicit market. Uh we have night offices across the state, 600 employees, um, and so and then the sort of ancillary services around all of those. Um, I would say your legal office is used quite heavily in this space because of sort of the administrative um adjudication process and making sure that our legal compliance um actions are thoroughly vetted before we process those. So that that covers it. I mean, the gamut if like we're trying to stay very focused on our work, but you know, on any given data, you never really know what's what will pop up.

Ben Larson 11:44

So, Clint, the the DCC's been through a lot and doing all these services, it's really kind of it's been a lot of learning as we go. Um, and you know, the law is constantly changing and all that kind of stuff, but like trying to adapt to this growing market and being reactive to the areas that you can be. And so the it's it the DCC hasn't been without its challenges, you know, throughout the years, right? And so I'm curious just from a personal perspective, like you witnessed a lot of that, you've been working in that, you know. As a CEO, I go out and try to recruit people for for leadership roles, and in certain cases, I'm having to sell them on taking that role. And and like it's not an easy seat that you're sitting in. And so I'm curious as to what someone said to you be like, Clint, you're perfect for this job. Do you want to sit in the hot seat? And you saying yes. Like I in in people anyone that's listened to this show knows that even us, the nice guys, haven't always been easy on the DCC. So, like, yeah, like kind of take us into that decision making just personally.

SPEAKER_01 13:00

Yeah. Well, I think um for me, it was a little bit an overt period of time. I worked at the state's department of finance, which is like its budgeting department. Um, and to where it towards the end of my career, I had a lot of state departments, but I became sort of a cannabis coordinator shortly after Prop 64 passed in the state. And so I worked with the legacy programs. I worked setting up how the sort of cannabis tax fund um was going to work and engaging with the legislature. So I had some of those original origin um interactions right after legalization. And then I moved out of the space for a while and came back as the chief deputy and got experience with the team and the work, yeah, what needed to be done. And so part of me felt like it was a little bit of unfinished finished business for men that felt personally, I felt a personal tie to. But I also, stepping in this role, had an opportunity to work with the executive team and the chief deputy and the department at a whole and and saw the good-natured work that people are doing and thought, like, we can make progress. It'll be incremental, it won't be as fast as people want. But I think continuity is what I offered in that director role and sort of knowing what that path is. And so that excited me. Like, I I see that we will end up at a good place somewhere. And honestly, you're never there to your point here of like we're having challenges. We will never stop having challenges. That's the same for you all in your given days, right? And so it's just like, what are we assessing those challenges, trying to make improvements and trying to progress in the right direction? And I think

Why Clint Took The Hot Seat

SPEAKER_01 14:32

we are doing that.

AnnaRae Grabstein 14:35

So continuity, okay, that's that's important, but it doesn't feel particularly like vision-oriented. And I'm wondering um broadly about what your real true vision is for the GCC, knowing where it's been, what you want to make sure continues to create stability in the market, but but what you would like to see change, open up, create innovation, what does that look like?

SPEAKER_01 15:05

Yeah, I mean, I really at the department level, we are a regulator. So our concern is consumer protection, youth protection, environmental protection. But we're doing so in a really unique environment, right? We're eight years into legalization, and only 40% of our state's consumption is coming from the legal market. So I think one important aspect is actually just moving consumption that's happening within the state already in that outside of that legal market into the uh into the legal market. And then you have all these protections, maybe imperfect, but certainly better than what's happening in the illicit market. And so that really is the vision. We see that happening, making sure that our legal market has safe and trusted product for people, that we have continued pressure on the illicit market, that we make retail access and consumer awareness the priority, um, not to increase use, but just make sure that use that is occurring is happening within our legal market, because I think it's very consum confusing for the consumer. And then making sure that we have reduced friction on our operators in a way that doesn't compromise our trust and safety. The industry also has to work for operators to be able to produce products for um consumers as well. So that's the beginning.

AnnaRae Grabstein 16:24

I want to double-click on this um this illicit market versus um regulated market participation. And I want to know how you guys get to those numbers and how you track to understand if you're succeeding in that area. You know, if I know you've checked in and listened to our show, and we watch data a lot. And one of the things that I've noticed is that even though the top line revenue of California um has had some dips, and um, although it seems to be recovering this year, um, that the amount of units that are individually sold has continued to increase, which just means that the units themselves um cost less when the revenue is dropping, if the amount of units is going up. That to me would would be a signal that there is more participation in the legal market. But but I'm not the regulator. Like when you say that that a certain percent of the business is coming from the unregulated market versus the not, what are you watching to make that determination?

SPEAKER_01 17:25

Yeah, so it is an estimate, right? Because we don't know basically what is happening fully in the illicit market. Um, in the simplest terms, and if we're doing a review and arrears and looking at some of the national survey data that's specific to California about use, and then estimating the amount of use that happens within the state, and then looking at the amount of purchases that are coming from our legal market and sort of then extrapolating like this is how much of the state's consumption is coming from the

Vision For Legal Market Growth

SPEAKER_01 17:55

legal market. But on a monthly basis, I'm looking at our data dashboards and I'm looking at units sold, which is up. We are slightly in the black on our sales figures for the first six months of the year, and you there appears to still be price reduction. So, like that is showing that the price reduction year over year is shrinking and units sold is growing. So, you know, if if if consumption isn't increasing within that same population, I think that is a good demarcation that we are seeing progress. But it's not like, oh, we're gonna flip on its head to 60%, you know, this year. Like I assume it's much more incremental than that.

Ben Larson 18:33

So a lot of people kind of conflate the DCC with like kind of the infrastructure that the guiding uh the ability for the the cannabis industry in California to operate successfully, to grow, to you know, produce revenue, all this kind of stuff. And you know, oftentimes when we're having conversations with regulators, like our job is to regulate the laws that are created. And if you want to change the laws, you have to go through the legislature. And so um I guess from the heat that you guys often receive, and we see a lot online, a lot of us follow like Elliot Lewis as as an example. Um, you know, how much do you think is within the DCC's control and is takes that kind of step-by-step like improvement versus what just needs to wholesale change from from a legislative perspective? Um Yeah, I I think I'll pause there. I have another question that's already coming in my head, but it's like, yeah, like how much how much of the criticism do you feel is like something that you guys are actively working on versus

Measuring Illicit Versus Legal Share

Ben Larson 19:44

things that actually need to change in in the laws?

SPEAKER_01 19:47

I I think we are there there are certainly, I think the one thing that I like to step back and say is uh adult use legalization of the state was approved through a voter-approved initiative. This wasn't, you know, developed by the legislature, wasn't developed by DCC. And so we are sort of living with the rules that were enacted by the California voters in that initiative. And while we can make modifications that further the intent and purposes, um, there are sort of features of that that were set in place that we don't out control. And like, I don't control the tax rate. I don't, um, in California, you have uh locals can ban commercial cannabis use and 50% uh are commercial cannabis activity. 55% of the state's jurisdictions still don't allow retail access. 30% of Californians still have lower limited access to cannabis. So like the that those are the rules of the road in California, right? Um, the criminal penalties associated with uh, you know, unlicensed commercial cannabis activity, that is not something that I control but and would activate the the local public safety community, of which there's like 611 different local law enforcement departments in the state. So those are the things that I don't control, but there are things across those spectrums that we're still trying to do. Like we're still trying to address retail access. We're actually doing something later today at the California State Fair where we invited local jurisdictions that want to talk about retail access. We're gonna go out there, we're gonna bring our staff there, we're gonna discuss the topic with them. Um, you know, we've got you know some information documents that we're sharing with locals. We're going to their association events and trying to sort of just bring education to the topic because that's what we can do. So we're doing that. Um, but yeah, I think it's even risky to put that in our strategic plan that we just did because we don't control that lever. But just because we don't control it doesn't mean we're not going to put forth effort to try to sort of bend the curve in the right way. And I would say that's across the spectrum on multitude of things. Um, but we're not also walking away from the the point of like we I know we don't control taxes and CDTFA clutts them, and CDFW has is large of a law enforcement off uh uh Which is the Department of Fish and Wildlife, sorry, that has as large of a law enforcement agency as us, but we're still the face of cannabis for most people. And we try to sort of honor that responsibility and build on it.

AnnaRae Grabstein 22:15

Well, so I I hear you that there's lots that are out of your control. Uh and some of those things are things like announcements this week of big layoffs at cannabis companies, um, other things that are driving market dynamics, like massive consolidation of retail. We now have a number of chain retailers. There's about 40, 40 retail groups around the state that that own more than five stores. Some of them own over 50

What DCC Controls And What It Doesn’t

AnnaRae Grabstein 22:49

stores. Um, and those are things that that the DCC has to move papers on, but maybe doesn't have have the right to get in the way of one way or the n or the other. Um but but Prop 64 did say that part of its intent was to get rid of the illicit market, to provide safe access to consumers. And part of that is about creating um an industry that is healthy, that can sustain itself financially. And and I'm wondering if you believe that the industry is healthy today.

SPEAKER_01 23:25

I think the industry is challenged. I think all the markers sort of suggest that. Um, but I do see areas of improvement. I mean, I think like capitalistic markets have kind of a tough sort of environment to begin with. Like if you're a restaurant or a bar entrepreneur too, right? Like it's usually not the easiest of jobs to do, and those don't last for long, and there's a low success rate. So I'm not surprised at sort of what we're seeing in some ways. And I think this is following a typical economic pattern of a new industry where you have a lot of new insurance, a lot of money either, um, and then you have consolidation of sort of like the ones that can navigate the complexity of the regulated environment. This is not something that like I'm trying to say is like the right thing, but like when I talked to uh an economist professor at Cal Paul a year that completed a research study, I was like, what are what do you see is the most successful elements of a business in you know in these industries? And they were like the ones that can navigate regulatory complexity. I was like, is that unique to Canvas? And I'm like, no, that's literally all of them. And so unfortunately, there is that that piece of it. Now I'm not saying that we don't do anything to address and try to remove barriers, and we're not being conscious of like a small operator and wanting them to be successful. I'm just saying like the natural inertia of markets probably lends to those bigger ones that have economies on scale and can navigate that complexity.

Ben Larson 24:59

I just want to pause and give a shout out to the organic Cal Poly reference. That was that was stellar. Thank you.

AnnaRae Grabstein 25:05

As a Cal Poly alum yourself.

SPEAKER_01 25:08

Oh, that's an app thing.

AnnaRae Grabstein 25:12

Do you do you think that there's any particular regulations that you have noticed are are are extra challenging that that creates financial pressure on on businesses more than others?

SPEAKER_01 25:28

Um, so I think the one that we have heard about for years that we actually have rule changes in um going out on right now, and they're actually up for public comment. Uh just finished yesterday. There's actually, I think, a public hearing happening as we speak on the topic was plant tagging. Like in California, each individual uh plant at the cultivation level has to be tagged. Um, people don't like that for a multitude of reasons, and we're going to a group tagging um rule change that hope that will be in effect sometime next year. So um that's one that we've seen.

Ben Larson 26:02

I think the the combined before you go on really quick, Anna Ray, wasn't there like a news story recently about these plant tags? I don't know if it was a news story. Sorry, but plant tags have historically been a triggering moment in in previous episodes.

AnnaRae Grabstein 26:19

So apparently there's there's a lot of uproar that the plant tags not only are they operationally complex, but apparently they're toxic as well, and they can't pass your own required um testing. Um, and and I I'm wondering if if you're following that discussion as well about around worker safety related to metric plant tags.

SPEAKER_01 26:41

Yeah, so so we are aware of that discussion. Actually, my team's sort of developing a more formal response that we're opening a release next week on it. But we've been working with the State Department that oversees the sort of Prop 65 administration and been sharing some of these test results. I think the one thing that at the outset is that some of the substances pointed out are readily available throughout our environment. Um, and it's the levels at which you're interacting with them that they become unsafe. What we test for at in our cannabis products is final form product that people are ingesting. Um, I don't think people are consuming client tags and sort of like what we've heard from the agency that's interacting, that's interacting with it, like the limited sort of external touching of it shouldn't create any concern. So to date, we have not heard anything that should be driving concern and hoping to get some more communication out there on this topic. But there, I think they're using testing things for people that are inhaling ingesting something and saying, yes, this tag that also, like you know, I don't test every water bottle that I interact with, but I assume there's some of these interactions as well, you know.

AnnaRae Grabstein 27:51

The irony though, right? Like, does this stuff sometimes make you laugh a little

Market Health And Consolidation Reality

AnnaRae Grabstein 27:55

of like, oh my gosh, I can't believe this is happening at something we hadn't thought of yet. Um, you know, cannabis is a bioaccumulator, it could be absorbing some sort of toxin from a plant tag. And if the very thing that you required ended up being the thing that that turned a pesticide fail test, it's just obviously it wasn't intentional, but there's a lot of things that are unintentional that happen through regulation, right?

SPEAKER_01 28:20

Yeah, I mean, honestly, people are always like, what are you concerned about? It's like the thing that I can't anticipate, right? Like I know the sort of bigger macro changes, but it's something like this, and like, so is this real? And is there something to be concerned about here? And sort of like, you know, our our own worker safety too. Like all those things have to be considered as well. Um, and so we take just I think when we run into those things, it's just trying to be proactive, gather information, and try to make, you know, uh an informed decision best we can. But from what I've heard to date, nothing to be concerned about here. Um, but you know, uh, you know, we'll we'll share more out in a more um formal way in the near future.

Ben Larson 29:02

I want to go back to the retailer. Um they hold a very strong voice, not only in our state, but in the industry as a whole. And um maybe this is largely because of the way the the industries are are structured and there's so much focus, and that's where the transaction happens. But um, you know, you even mentioned that the the retailers are having a voice at at the state fair. Um, you know, Kakoa was largely started by the retailers and and they're very active in Sacramento. Um, and then I mentioned Elliot Lewis, who's just very loud on LinkedIn. Um and they seem to drive a a lot of a lot of the decision making around the industry. And I'm curious as to how you think that dynamic um came to be in the industry and whether you think that's always going to be the case. Like, will the retailers always have the loudest voice when it comes to cannabis policy?

SPEAKER_01 30:06

I think my my estimation, and certainly there can be differing opinions here, is that at the local level, that is tends to be the one area where they constrain the amount of licenses that are issued, right? And so you don't want to be overrun with retailers. I mean, that that is really was the framework in which Prop 64 was developed was this sort of like belt and suspenders, like make sure it's safe type of program. And like that, and sort of like as time goes on, we sort of remove some of those layers of like, does every plant need to be tagged? That's really actually not providing a lot of compliance. But I do think, like, speaking to that point of like, because there's less of them and they are the sort of access point to consumers, they they hold a lot of power. Um, you know, if we got more of those California jurisdictions on, would they hold the same amount of power? Probably not. But will there be a time where there's no sort of limits on the amount of retailers within a jurisdiction? I don't think that that's likely either. Because even within alcohol, there's limits on those types of things as well. So um I think with more retail access and that being distributed more broadly, um, that could reduce um some of that power. I think, I think that would be good. Um, it would be good because the consumer confusion angle and just they need reasonable access, they're not gonna deal with the complexity of like what it takes to access legal cannabis and they don't may not even know they're interacting with it, but just having more players sort of reduce creates that competition and sort of um kind of helps address that issue. He could. Yeah.

AnnaRae Grabstein 31:49

So within the context of the retailer, I want to

Plant Tagging Changes And Safety Claims

AnnaRae Grabstein 31:52

specifically dive into something that was pretty viral over the past week or so. And that is um Elliot Lewis posting on um Instagram and LinkedIn and all of the public profiles um of himself talking with uh someone from the DCC on the phone. And um, it was about an embargo of some product uh at one of his catalyst stores that was flagged as um appealing to children. And um Elliot, I'm sure, internally would could be called a thorn in the side of the DCC. Um, he and Catalyst have sued the DCC before over track and trace enforcement and um and other and diversion and all kinds of things. And um I was shocked, I think that the industry was shocked. Like there was a lot of just like mouth drop of holy crap, this guy just put the DCC on speakerphone and is putting it on the internet. Like that is bold.

Ben Larson 32:53

Wait, did he did he tell them? Isn't that illegal?

AnnaRae Grabstein 32:57

Um, I don't know if it's illegal, but I know that it happened and that I'm sure all of us saw it. Um you saw it, right?

SPEAKER_01 33:06

I I have been on vacation for two weeks and I'm just back and I've been reading it. I I think one of the things that helps me do this job well is I'm not on social media. I do read through the press clips every morning and go through that, but I think some of that churn is not like in my sort of uh daily life um for sure. So I did not hear that. Um I did, so I don't have any anything to add, uh, you know, other than um it's unfortunate to understand that they're you know publicly um, you know, recording one of our employees. Um and so that's unfortunate to hear. Um, but I don't have any more to add, unfortunately.

AnnaRae Grabstein 33:47

Okay. Um I think valid, uh not a surprising response. I will, I would like to talk more about marketing to children and appealing to children um a little bit more. I think it's a really complex topic. Um, my husband loves craft beer. Um, I'm often the one that goes to the grocery store. My son comes with me, and I often let him pick out the beer because he loves all the packages of craft beer. And sometimes he likes to pick out craft beer that has Simpsons characters um on the beam. Um yeah, it uh definitely appeals to children. And um I have been able to communicate as a parent very clearly um that it is not for children. And he knows when he goes into our fridge that the beer isn't for him, and uh and that is the way that we manage that in my household.

Retailer Power And Access Constraints

AnnaRae Grabstein 34:42

And um I think that there's a lot of things going on with the rules around marketing to children. And I will say that I absolutely um support not marketing to children in concept and in theory. I think the actualization is complicated. And part of that has to do with the fact that in California, we don't have a pre-approval for labels and packaging like you might if you were in Ohio or some other states where before any product comes to market, the regulators actually have to approve it. And so in a system like that, there's a lot of upfront regulatory um friction to get the product ready to market. And we don't have that in California. You can bring a product to market very, fairly quickly. Um, but then you then in Ohio, you would have that certainty that the regulators have okayed the product. And what we see now is that instead in California, products come to market, they're at retail, businesses have spent lots of money on them, commercializing them, and then sometimes they're getting flagged um and pulled for various reasons. And I think that it's one of those very qualitative kind of uh conclusions of if something markets to children or if adults like childish things. Oh, Ben is holding up the picture of the Simpsons beer. Yeah, and it's their heads, their heads look like uh look like uh big.

Ben Larson 36:04

It was so notable I had to take a picture and send it to the team like because every time I see something like this, I'm just looking.

SPEAKER_01 36:11

Yeah.

AnnaRae Grabstein 36:12

It makes your head explode because it feels unfair, but it doesn't necessarily feel inappropriate to me um when I see the Simpsons beer. So I wanna, since this Elliott Lewis thing specifically had to do with marketing to children and product embargoes, I think it's worthwhile to discuss of uh what you see as um the flaws in the system if you see a path towards making it less friction causing for operators and for the DCC in a way that can work for folks. Like how do you see solving this problem?

SPEAKER_01 36:47

Yeah, this one is a challenging one overall, I would say. Um we we were actually talking about this uh yesterday afternoon for quite a quite a while. And you always get into these sort of nuanced discussions of whether this is or isn't attractive to children or an adult. And um, and so it's a lot of brain energy goes there, um, which may be better used in other places at times. Um I will say that there are a couple of things. Though when I engage with the California State Legislature, that their main focus as it relates to cannabis at this point is youth protection. Um and that is their focus area. And there's a bill running right now to provide more specificity on what it means to be attractive to children. Um, and sort of that bill is making its way through as a way to sort of show that they care about this. They required an audit to go through what our review looks like and some of the packaging. Um, that was completed last summer. We had an oversight hearing. Um, and it would the sort of temperament was very much like we need to see improvement here. Um, you know, and the the interesting one brought up in the hearing was it's not your dad's root beer, which I think is started as an alcohol product, is now both alcohol and cannabis as well. And so I do think there is a little bit of uh inequity there, but it doesn't result, remove our sort of responsibility to make improvement in that space. And so we are sort of opening to engagement um, you know, with the legislature on that topic as well. I think that there's also probably a little bit of a difference of having a sip of beer in a colorful can that you don't

Packaging That Appeals To Kids

SPEAKER_01 38:29

notice is bothering you, or you know, it probably doesn't have the taste that a kid wants versus like a sugary edible or beverage that they don't know that later comes back and has a quite a big stronger reaction. And so like I've thought about this as well. But I think to your point, I think there is a conversation to be had with parents and children about like we say you can't have, you know, this adult drink, you can't have this as well. And then also making sure parents are being safe about how they store these things. Like if a gummy is laying out, um, that that is going to be a problem no matter what the packaging looks like. And so that'll be, I think, something over time that we'll um have to sort of make improvements on. Um, but the other plug, sorry, I know I'm talking a little bit long, but I did want to mention that we have released an AI image analyzer to kind of help with this. It's not the ultimate say, but it's enough of the checking through our rules and the image to say, like, hey, this is likely compliant, this might not be compliant, or this is likely not compliant to help operators navigate that. And the problem with doing the front-end review is there's tens of thousands of product labels out there, and just sort of the staff power to do that would be you know millions and millions of dollars, and it just doesn't feel like the best use of resources. And so we have tried to use um AI to kind of help assist with that um as a tool um for industry.

Ben Larson 40:00

Yeah, it's really uh I just want to give a shout out to the team because when we when we met in OKC, um you and the team had indicated that you were listening to some of the episodes and and we were thinking about some of the same ideas at the same time. So I just thought that was really cool and kind of like humanized the DCC a little bit for us.

SPEAKER_01 40:21

Yeah, I mean, we we aren't humans on both sides of this equation. I think that's the one thing I've been trying to do on this role a little bit is like there's 600 people that are good natured that want to do a good thing in this department. And I know the operators that exist in that same universe of my making their livelihood. And so just sort of bridging that divide at times, I think is an important part of the work.

AnnaRae Grabstein 40:43

Yeah. As as one more point on this child marketing, and I'm maybe on my soapbox a little bit here, but as somebody that really does follow all the states really closely and sees how the different rules related to marketing have been executed in different places. Um, earlier we talked about the health of the industry, and you talked about kind of some of the natural uh patterns of capitalism in emerging markets. Uh, when it comes to strict, strict limits on marketing, and I think Florida is an example of this where there's almost no branding allowed on packaging and everything needs to be stored behind the counter. Uh, what that does is it actually really devalues and takes away from product differentiation, which will in turn drive the market to commoditization faster because you can't tell the difference between anything. And so um I would just encourage an approach of thinking about how we can, yes, continue to protect children, but also ensure that the innovative spirit of Californians, California products and agriculture gets to continue to be differentiated to consumers so that they can start to learn about these companies and these businesses and entrepreneurs that are bringing these products to market and understand them, as opposed to just everything ending up in a in a white package.

Ben Larson 42:12

Uh because that actually, the Canadian model doesn't work.

SPEAKER_01 42:16

Yeah. But I'm glad you brought this up because I think we we share that too. Like California cannabis culture is important and should live on. I mean, like there has been interest in sort of like legislating what the stray names are. And I think they do that in some other states, but some of these straight names exist well before legalization. I mean, and they may have names that you know have names similar to kids' candy, but I don't think people are ingesting them just for the name themselves. And so just trying to be reasonable here about like, you know, I think it's twofold, accidental ingestion risk, and then sort of like used exposure to higher THC products. But to your point, if there's no packaging, what are people differentiating on higher THC? So like that's also a risk. And so, like, I think those are things that are we are thinking about in relation to this. And so while there could be some tightening that and make some improvements here, it's not like a wholesale like plain packaged game.

Ben Larson 43:11

Great. So I I I'm being cognizant of time. There's there's so many things that we can talk about. I do want to kind of go a little bit more macro view. Um, we're like the in this interesting time where you you even indicated like California, we only have so much coverage as far as like legal access to cannabis. Um, however, at the federal level, you know, we're now having these conversations about schedule three interstate commerce. I think we just saw the the the More Act get reintroduced. Um and then there's hemp, and there's there's multiple bills circulating around Congress right now about legalization of hemp. And so all this for me, you know, in the next two to three years, it just feels like this conversation is accelerating to more of a national scale of cannabis. And And I, you know, starting high level, and I guess you can kind of take us in the direction you want to take it. Like, how do you think

AI Tool For Label Compliance

Ben Larson 44:07

about these things when there's so much to do just to kind of get all of California on board? And then all of a sudden the federal conversation is accelerating, and then you have to start thinking about beyond the borders. And yeah, like how does the DCC think about this?

SPEAKER_01 44:22

Yeah. Well, I was saying the day the order dropped, and I started reading it first thing that morning, and I was like, I can't believe this is in here, to be perfectly honest. I know I'm kind of new to this role, but it's forget to tell me that this is how you were the only one. Um, so so glad, glad to learn that everyone was pretty shocked about the approach. Um, but I think I think the federal discussion is positive, right? Because we need to end the prohibition to sort of be able to have functional legal markets in this country and really across the world here, because to the extent there aren't functional legal markets, illicit markets will persist. Um, and so I do think that that's the right direction. This is incremental progress. And when I think about it in relation to like California, this seems like it could add confusion, right? Um, in that, like, well, what does it mean that it's now federally legal under a state medical license? You know, that's a DH registered person. That's another layer of sort of government review and complexity. And so I think it adds complexity to the market, um, but it does sort of maybe sort of remove these borders and sort of like in and it being California, I think there are economic opportunities too, because I think that as a brand, California cannabis brand, I think will persist over time. Um, and I and I believe that to be true. So I think all those things are are in play. And when I think about hemp as well, you know, like that's another consumer confusion piece. It's like it's this, it's a cannabinoid that can be intoxicating to people. Let's regulate it the same, let's call it the same, let's sort of like be able to treat it the same. So, so that the the end user knows what they're interacting with and how to interact with it.

AnnaRae Grabstein 46:15

Well, so you said that there's economic opportunity for for California operators. Uh from my perspective, one of the major unlocks for the economic opportunity will be efforts that the DCC could undertake to restructure some of the commercial pathways through things like the track and trace system that would make it possible in an interstate commerce world for something to leave California metric and end up in Pennsylvania metric or in Europe metric or equivalent. Um are you guys starting to make efforts to figure out how to support the commercial pathways beyond California that are allowed under a DEA registration, DEA license reality?

SPEAKER_01 47:10

Yeah, so I would say like quickly after the order came out, we started like brainstorming a lot of ideas and having a lot of discussion internally about how that would work. And then we've sort of like over time, like have sort of triaged our reaction to this. And we were very focused on the early registration period and making some modifications within our system for those that wanted to have hold a medical license in California so they can register with the DA. And so we put some work and effort to that. And so there's still some cleanup we need to do on the back end of that. And so we're focused on that in addition to like what is next. So we don't have DEA guidance, we don't have IRS guidance, and so those are some of the bigger things. We don't have the DEA hearing results, um, whatever the results of any of this litigation are. And so those are like the four things that also I think will come in and help inform like what the next step is on those fronts. Like we have not been told from the DEA that yes, in our state Congress is allowed and you should be modifying your state rules to allow for that. I mean, we've been kind of told not expressly, but a little bit given indications to the contrary at this point.

AnnaRae Grabstein 48:20

Hmm.

SPEAKER_01 48:20

Say more about those indications to the contrary. That is basically like they don't have an answer. Like we we uh as everyone knows, like we've put in a lot of inquiries to the DEA to try to understand what the order means, how it'll be implemented. And you know, they're working through the process and getting organized on their end on like what those responses are. And so I imagine at some point in the future there will be formal guidance that will put some rules on the road. And then once some of those are in place, then I think we can be put uh putting in place a more appropriate reaction versus guessing what we think the DEA is doing and trying to modify our rules around that.

Ben Larson 48:59

So speaking of interstate commerce and cannabinoids being cannabinoids, uh, there's been a fair amount of cannabinoids moving around the country under the hemp infrastructure. And say what you will about how that came about and and and the laws around it and what's happening uh coming this November. Um

Schedule III And Interstate Commerce Limits

Ben Larson 49:19

there's a lot of effort uh in preserving some aspects of of that hemp marketplace nationally. AB8 was passed last year um to really kind of I don't know if it's pushed hemp into the cannabis supply chain or push hemp out of California. Either way, in the instance some of this gains traction and there are cannabinoids moving around the country, and you going to Texas or Tennessee and you're going into Total Wines and you're seeing, say, hemp beverages there. What do you anticipate the pathway would be to kind of open up those opportunities back in California? Would it be to loosen the cannabis licensing to somehow incorporate access to to retailers? I know Prop 64 has limitations about out the co-location of alcohol and cannabis. Um or would it be revisiting how California um manages hemp, I guess?

SPEAKER_01 50:26

So 88 did pass last year. Um, but since the fall of 2024, um, you know, intoxicating hemp cannabinoids have been prohibited in this state. Um, and beginning January 1st, 2028, they will be allowed into the cannabis supply chain and the form of biomass entering into the supply chain and then making cannabinoid products. Um I think, regardless of what happens at the federal level, that still seems like the right approach in our in our minds, because ultimately it is a cannabinoid that can get people intoxicated, regulating it similarly, having those same sort of exit points to consumers seems like it's a reasonable way for people to understand what they're interacting with versus trying to differentiate based on the name that produces the same result as totally outside of the regulated market. So I don't really see that there, based on what I've seen to date, that there would be a need to modify the approach under A B, but we have to wait and see. Like I don't know what those federal rule changes would be. I mean, we are would be allowing hemp into our supply chain. We would be allowing hemp products to be allowed to Californians through our cannabis market. Um, and if there is, you know, like uh like an exit point for those that match the federal definition of hemp, or whatever that is at that point, um, you know, I think I think our rules could allow for that as well. Um, but I think like while it's in California, it sort of needs to interact with all the other cannabinoids, if that makes sense.

Ben Larson 52:02

So so let me um ask this from the lens of the cannabis marketplace, then do we see any opportunity in the future by which not all cannabinoids have to be sold through these license operators that have such a strong voice to you know protect the the marketplace that they currently have a uh a hold on? And the reason being is that most products in dispensaries gravitate towards high potency. And we have seen because of this great hemp experiment over the last call it five years, six years, um, that there is a different consumer that seeks lower dose products that aren't available in most dispensaries. And so maybe it's not the desire or the position of of the regulators to say, hey, we we want to create more consumers and we want to create that much more access. Um, but if we're working towards legalization and working towards access, that does seem like an opportunity um to find different consumers in different use cases. And you know, consuming two milligrams or four milligrams in a 12-ounce beverage is very different than you know, consuming concentrate or you know, 30% flour.

SPEAKER_01 53:24

Right. Yeah, I mean I've heard this sort of like 50,000 foot level pitch on maybe having lower THC products outside uh cannabis retailers, but that hasn't really there's not hasn't been a lot of paper or specificity or any real proposals to pursue that within California. I think it's worth a worthy discussion when the time comes on whether that that's the right approach. It's still, I think, would interact with local control requirements in California, which adds some complexity of like if you don't have uh if you a local doesn't allow it, um could it be allowed um within these other jurisdictions? And so I think there's complexity there that would have to be worked through and discussed. Um, but you know, I think I think those are all worthwhile discussions to have um when there's

Hemp Rules And Low Dose Access Debate

SPEAKER_01 54:10

proposals to consider.

unknown 54:12

Yeah.

AnnaRae Grabstein 54:14

Uh we're we're getting closer to the hour. I had one more topic I really wanted to uh to cover and ask you about. Uh last week I spoke with Aaron Edelheid, who is a pretty prolific investor in the cannabis space. He has a uh fund called Mindset Capital. Um he's he's invested significant money directly into the California cannabis market as well. And um, he told me that in his opinion, the biggest liability facing the industry right now are pesticide levels and pesticides broadly. And he thinks that um many businesses are uninvestable because of pesticide use and of liabilities around consumer safety related to pesticides. And uh I'm wondering if what what you think about pesticides uh and and their presence in in the cannabis supply chain right now.

SPEAKER_01 55:08

Right. So I think we have made pr progress on this run, um, being able to sort of test for all of the currently required 66 pesticides at our labs and being able to do product checking. We have a surveillance program going where we have compliance staff go out and pull product from shelves and then actually do tests for that. And sort of like we are building sort of the compliance mechanisms to improve on that. We also just got final approval yesterday for some regulatory changes that we've had in the works to add 14 more pesticides. And there was some the way that pesticides were organized kind of allowed for some gainsmanship. So that becomes effective immediately or uh October 1st. And some of and then we're even testing to lower action levels 18 months from then. I think within the testing space, the one challenge is without uh you know federal legalization that has sort of the the labs and the science that behind this is that we're on the sort of edge of science every time we start testing for a new uh pesticide within a cannabis product and having to sort of move that needle incrementally. And so there is complexity and challenge there that I think is unique. Um, but I think it's an area that we're probably never done on. I mean, someone could also say we usually test for all 550 pesticides every time, and that's not economically viable either. And so I think it's just figuring out we work with our Department of Pesticide Regulation, um, sort of interacting with them on sort of the right cadence to make adjustments and looking at that. I think we test for quite a few in comparison to other states. Um, and I think we are making progress there.

AnnaRae Grabstein 56:49

Okay, cool. Um, well, gosh, so many things to keep talking about. We'll have to have you back in a couple months. Once there is more clarity on schedule three, we'll we'll want to put your feet to the fire on how you're gonna unlock interstate commerce and global uh global commerce for cannabis companies, um, all the things. Uh, but it is time for our last call. So uh Clint, what's your final message for our listeners, advice or call to action uh to leave folks with today?

SPEAKER_01 57:20

Yeah, no, uh

Pesticides Testing And New Standards

SPEAKER_01 57:21

just appreciate the opportunity to be here to discuss, uh, have the discussion with you all uh where we're trying to make the right progress. It'll be incremental, probably be a little bit imperfect, but uh we we want to move alongside everybody else in the right direction.

Ben Larson 57:37

Amazing. Clint Kellum, uh the director of the California Department of California Cannabis Control. Thank you uh for spending the last hour with us. It's it's great to great to catch up again.

unknown 57:49

Yeah.

AnnaRae Grabstein 57:50

See you around the hoop.

Ben Larson 57:53

Alrighty. We did it, got through. I I think we're pretty nice, right?

AnnaRae Grabstein 57:58

Yeah, and we asked hard questions. You know, Clint did a good job of deflecting. He he didn't take the Elliott Lewis bait. Um that that's that's good. I didn't really expect him to, but I I wanted to ask.

Ben Larson 58:10

So well, no, I mean he's notably notably not on LinkedIn, and so like it's easy, maybe it's easy to avoid uh Mr. Mr. Lewis.

AnnaRae Grabstein 58:17

I noticed that, you know, when he got hired, I think a lot of us were like, who the heck is this guy? Yeah, and he doesn't exist, he's not on LinkedIn. Um but uh he's got good hair, so um now everyone knows who Clint is. We've brought him to you folks.

Ben Larson 58:38

Uh yeah, Pepsi. All right, thank you to our teams at Virtosa and Wolfmeyer,

Final Message And Sign Off

Ben Larson 58:46

and of course, our producer Eric Rossetti. But most importantly, thank you. Thank you for listening, thank you for visiting, thank you for commenting. If you've enjoyed this podcast, please share, like, review, do all the things wherever you listen to your podcasts. Thanks for listening. As always, folks, stay curious, stay informed, and most importantly, keep your spirits high. Until next time. That's the show.