Key California Cannabis Legislation

Last verified: March 2026

AB 564: The Excise Tax Freeze

Signed on September 22, 2025, Assembly Bill 564 delivered the tax relief that California's cannabis industry had been demanding for years. The law reduced the state excise tax from 19% to 15% and froze it at that rate through June 2028.

The bill was driven by an unprecedented grassroots campaign — over 10,000 letters flooded the legislature from operators, patients, and advocates arguing that the combined state and local tax burden was destroying legal businesses and driving consumers to the illicit market. Governor Newsom signed it after acknowledging that the tax structure was "undermining the goals of Proposition 64."

AB 564 was sponsored by California NORML and supported by a broad coalition including the California Cannabis Industry Association (CCIA), Origins Council, and hundreds of individual operators. The four-percentage-point reduction sounds modest, but for businesses operating on razor-thin margins while competing with an untaxed illicit market, it represents meaningful relief.

AB 1775: Consumption Cafes

Effective January 1, 2025, Assembly Bill 1775 transformed California's consumption lounges into full Amsterdam-style cafes. The law allows licensed cannabis retailers with on-site consumption permits to serve non-infused food and beverages and host live entertainment — music, comedy, DJ sets, art exhibitions, and other performances.

Before AB 1775, consumption lounges were limited to pre-packaged snacks and could not host events, making it nearly impossible to build a sustainable business model. The bill, championed by Assemblymember Matt Haney (San Francisco), recognized that cannabis social venues need the same tools as bars and restaurants to attract and retain customers. Alcohol remains prohibited on the premises.

AB 8: Intoxicating Hemp Regulation

Signed in fall 2025, Assembly Bill 8 established the most comprehensive intoxicating hemp regulation in the nation. The law responds to the explosion of hemp-derived THC products — delta-8, THC-A flower, and other intoxicating hemp goods — that exploited a loophole in the 2018 federal Farm Bill.

AB 8 is being implemented in phases:

• Phase 1 (January 2026): Banned the sale of smokable hemp products in California. Retailers selling non-compliant hemp flower, pre-rolls, and vapes face enforcement action from the Department of Cannabis Control
• Full integration (January 2028): All intoxicating hemp-derived cannabinoid products will be brought under the DCC's regulatory framework, subject to the same testing, labeling, packaging, and potency standards as cannabis products

AB 8 positions California ahead of the federal government, which adopted a revised total-THC hemp definition in November 2025 that does not take effect until November 2026.

AB 2188 & SB 700: Employment Protections

Effective January 1, 2024, these companion laws created one of the strongest cannabis employment protection frameworks in the country:

• AB 2188 amended the Fair Employment and Housing Act (FEHA) to prohibit employer discrimination based on off-duty cannabis use. Employers can no longer use urine tests that detect non-psychoactive metabolites (THC-COOH) — they must use tests for active THC (delta-9) that indicate recent consumption rather than historical use
• SB 700 prohibits employers from asking job applicants about prior cannabis use during the hiring process. Past cannabis use discovered through background checks cannot be used as a factor in hiring decisions

Exemptions apply for construction trades, DOT-regulated positions, federal security clearance holders, and federal contractors. See the full employment protections page for details.

Compassion Care & Licensing Reform

SB 34 (2019) — the Dennis Peron & Brownie Mary Act — allows licensed operators to donate cannabis to medical patients without triggering excise or sales tax. Named for two pioneers of California's medical cannabis movement, the law recognized that compassion care was being crushed by the tax burden of the legal market. AB 2555 extended the program through 2030.

On the licensing front, the DCC filed a comprehensive cultivation regulation package in March 2025 that streamlines administrative processes and simplifies license type changes for cultivators. Meanwhile, provisional licenses expired January 1, 2026 — a cliff that threatened to shut down hundreds of businesses still working through the annual licensing process. SB 51 extended provisional license eligibility through 2031, but only for equity retailers, leaving non-equity provisional holders in a precarious position.

DCC Enforcement Activity

The Department of Cannabis Control has significantly ramped up enforcement:

• 366 disciplinary actions taken in 2024 against licensed operators for regulatory violations
• 34 product recalls covering 444 individual products in Q2 2025 alone, primarily for pesticide contamination and labeling inaccuracies