AB 2537 Held, but the Fight for Smarter Cannabis Enforcement Moves Forward

By Amy O'Gorman Jenkins, Executive Director of the California Cannabis Operators Assocation

Suspense Day brought disappointing results for California’s regulated cannabis industry and exposed the resistance standing in the way of meaningful enforcement reform.

AB 2537: Lost Enforcement Opportunity

California’s Senate Appropriations Committee delivered disappointing results for the regulated cannabis industry on Thursday, advancing one CaCOA-supported measure while holding several others, including CaCOA-sponsored Assembly Bill 2537 (Chen), the Cannabis Enforcement Accountability and Public Health Prioritization Act.

LET’S BE CLEAR: AB 2537 was not held because its policy was flawed. It was held after DCC resisted a reasonable legislative effort to bring greater strategy, transparency, and accountability to the use of its enforcement resources.

AB 2537 advanced a straightforward principle: California should focus its limited enforcement resources on unlicensed activity and the conduct posing the greatest threats to public health, consumer safety, and the integrity of the regulated market. The bill would have required the DCC to establish and publish a risk-based enforcement policy, prioritize violations based on their potential for harm, and provide greater transparency in how its enforcement resources are deployed.

The bill did not eliminate DCC’s authority to pursue any violation. It did not excuse licensees from complying with the law. And it did not prevent the DCC from taking action against technical or administrative violations.

It simply required the DCC to establish priorities and explain how those priorities were being implemented.

Unfortunately, DCC did not want the Legislature directing how it should exercise that authority, even as licensed businesses continue to report that the DCC devotes disproportionate attention to technical violations committed by regulated operators while sophisticated illicit businesses openly manufacture, distribute, and sell untested products outside the legal system.

The fiscal objections raised against AB 2537 were equally difficult to justify. The DCC portrayed the development of an enforcement prioritization policy and related reporting as a significant new expense. But prioritizing existing personnel and resources is a basic function of responsible agency management, not a new enforcement program. AB 2537 did not require DCC to open new offices, launch a new enforcement division, or assume jurisdiction over a new industry. It asked the DCC to use the authority, personnel, and resources it already possesses more strategically and transparently.

The suggestion that California cannot afford to prioritize its existing enforcement activities is backward. California cannot afford not to.

The illicit market continues to erode legal sales, threaten consumers, undermine compliant businesses, and deprive the state and local governments of significant tax revenue. Every dollar and enforcement hour spent pursuing low-risk technical violations at the expense of serious unlawful activity carries its own fiscal consequence, one that was largely absent from the analysis surrounding AB 2537.

We are deeply disappointed that DCC’s resistance prevailed. But the DCC’s opposition also demonstrated precisely why legislation is necessary. An agency should not be permitted to evade reasonable oversight merely because it does not want the Legislature to establish expectations for how public resources are used.

AB 2537 nevertheless achieved something important. It educated legislators about the enforcement failures confronting California’s regulated cannabis market and built meaningful support for a more strategic, risk-based approach. It also attracted the interest of additional legislators who recognize that the current framework is not working and must evolve.

We extend our sincere gratitude to the bill’s author, Assemblymember Phil Chen, for his steadfast leadership and willingness to challenge the status quo. We are especially grateful that he has expressed an interest in continuing this work. His leadership and the attention AB 2537 generated among other legislators provide a strong foundation for the next phase of this effort. 

AB 1826: Another Missed Opportunity for Accountability

We are also disappointed that AB 1826, introduced by Assemblymember Tom Lackey, was held. That measure would have improved California’s cannabis recall, embargo, and product-destruction processes by providing greater clarity, supporting documentation, and procedural protections for licensees.

Taken together, the outcomes of AB 2537 and AB 1826 reveal a troubling resistance to even modest reforms intended to make cannabis regulation more transparent, consistent, and accountable. Regulated businesses are expected to comply with an extraordinarily complex system of laws and regulations. It is not unreasonable to expect the regulator administering that system to operate under clear standards and meaningful oversight.

These outcomes reinforce the need to return next year with a broader and more comprehensive regulatory and enforcement reform agenda.

AB 2506: An Unequal Framework Stopped

AB 2506 by Assemblymember Gregg Hart, which CaCOA opposed, was also held and will not advance this year.

AB 2506 would have authorized the governor to enter into agreements that would allow commercial cannabis activity between state-licensed businesses and businesses licensed by federally recognized tribes in California.

CaCOA respects tribal sovereignty and supports appropriate opportunities for tribal participation in California’s regulated cannabis market. However, we opposed creating a new commercial framework without first ensuring equitable regulatory, tax, enforcement, and marketplace requirements for everyone participating in that market.

California's licensing and tax structure asks a great deal of operators: extensive compliance requirements, rigorous local and state oversight, and among the highest cannabis tax rates in the country. As the state considers changes to the regulatory framework, it's worth ensuring those requirements translate into a stable, competitive market rather than disadvantaging the businesses that built it in good faith. A future framework should aim for consistency and fairness across all license holders.

AB 2249 Advances

AB 2249 by Assemblymember Jacqui Irwin passed the Senate Appropriations Committee and will advance to the Senate Floor.

AB 2249 establishes standards governing cannabis packaging, labeling, and products considered attractive to children, while preserving responsible adult-oriented branding and providing businesses with an appropriate transition period.

CaCOA has worked closely with Assemblymember Irwin, the Administration, and industry stakeholders to improve the bill and address provisions that could otherwise have created significant unintended consequences for compliant businesses. Its passage from the suspense file represents meaningful progress, and we will remain actively engaged as the measure moves through the final weeks of the legislative session.

This Work Is Not Over

Suspense Day brought limited success and significant disappointment. It also clarified the challenge ahead.

AB 2537 exposed both the need for enforcement reform and the institutional resistance standing in its way. It created a public record, educated legislators, attracted new interest, and started a conversation that DCC’s opposition cannot end.

CaCOA is already engaging Assemblymember Phil Chen and a growing group of interested legislators to press for the formation of a legislative select committee focused on California’s fragmented and ineffective cannabis enforcement framework.

Enforcement responsibility is currently dispersed across multiple state agencies and levels of government, often without clear coordination, consistent priorities, or meaningful accountability. A select committee would provide a dedicated forum to examine those systemic failures, bring agencies and stakeholders before the Legislature, and develop a more coordinated and effective approach.

Over the fall, we will work to build legislative and stakeholder support for this effort while exploring additional strategies for meaningful regulatory and enforcement reform. We will continue pressing the Administration and the Legislature to explain why compliant businesses remain subject to aggressive scrutiny while unlicensed operators openly undermine the legal market, evade taxes, and endanger consumers.

California’s regulated cannabis industry deserves an enforcement system that distinguishes between genuine threats and technical mistakes, coordinates resources across agencies, and holds both licensees and regulators accountable.

AB 2537 may have been held. The demand for smarter enforcement and legislative accountability was not.

We need your voice: join the effort to protect California's legal cannabis market today!