California Governor Gavin Newsom last week vetoed a bill that would have allowed cannabis cafes to offer weed, food and beverages to patrons at licensed establishments reminiscent of the famed coffee shops in Amsterdam. The measure, Assembly Bill 374 (AB 374), was passed by the California legislature last month after being introduced earlier this year by Democratic Assemblymember Matt Haney.

Under current California law, cannabis consumption lounges cannot sell freshly prepared food to their patrons. A rule change adopted in November of last year allows lounges to offer prepackaged food and beverages and for customers to bring their own freshly prepared items on a limited basis, but the businesses themselves are denied the opportunity to serve most non-infused products to their customers.

Haney’s bill would have allowed California’s cannabis consumption lounges to sell freshly prepared food and drinks and to host live entertainment events. In the Netherlands, more than 700 cannabis cafes, often referred to as coffee shops, draw 1.5 million visitors per year, according to information from Haney’s office. Allowing the state’s consumption lounges to operate under a similar business model would give the businesses new economic opportunities and could serve as a draw for tourists and locals to visit struggling downtown business districts.

“Lots of people want to enjoy legal cannabis in the company of others. And many people want to do that while sipping coffee, eating a scone, or listening to music,” Haney said in a statement. “There’s absolutely no good reason from an economic, health, or safety standpoint that the state should make that illegal. If an authorized cannabis retail store wants to also sell a cup of coffee and a sandwich, we should allow cities to make that possible and stop holding back these small businesses.”

But on Saturday, Newsom vetoed AB 374, although the governor said he appreciates “the author’s intent to provide cannabis retailers with increased business opportunities and an avenue to attract new customers.” In his veto message, Newsom said he was concerned that the bill conflicted with California legislation to provide a smoke-free workplace for all workers.

“Protecting the health and safety of workers is paramount. I encourage the author to address this concern in subsequent legislation,” the governor added. “For this reason, I cannot sign this bill.”

Sponsor Promises New Bill Next Year

After Newsom vetoed the bill, Haney decried the move in a statement on social media, saying that the bill is needed to help support California’s regulated cannabis industry, which continues to face challenges including high costs and competition from the state’s pervasive unlicensed operators.

“The bill was widely seen as an attempt to level the playing field for the highly taxed and regulated legal cannabis industry that is being forced to compete in California with a thriving cannabis black market,” Haney said. “The illegal sale of cannabis is extremely profitable in California with illegal sellers choosing to simply ignore costly regulations, product testing, permitting, and taxation. California’s legal cannabis sales reached $4 billion in 2020, while illegal sales are believed to have surpassed $8 billion that same year.”

Haney added that voters have already authorized smoking in the businesses covered by the bill and vowed to draft new legislation to legalize cannabis cafes in the next legislative session.

“The voters of California have already decided to legalize the smoking of cannabis in public dispensaries. AB 374 just allows businesses where smoking is already happening to sell coffee and food and hold live shows,” Haney wrote on X, the social media platform formerly known as Twitter. “I appreciate and respect the Governor’s concerns about worker’s health. And I’m looking forward to working closely with his office and with labor leaders to make sure we get this right when I introduce the bill again next year.”

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A California lawmaker has introduced a bill that would allow the state’s licensed cannabis consumption lounges to sell freshly prepared foods and beverages and host live events. The measure, Assembly Bill 374 (AB 374), was introduced last week by Democratic Assembly Member Matt Haney.

Under California law, cannabis consumption lounges are not allowed to sell freshly prepared food to their patrons. A rule change adopted in November 2022 allows lounges to offer prepackaged food and beverages and for customers to bring their own freshly prepared items on a limited basis, but the businesses themselves are denied the opportunity to serve most non-infused products to their customers.

Haney’s bill would allow consumption lounges in California to sell freshly prepared food and drinks and to host live entertainment events. In the Netherlands, more than 700 cannabis cafes, often referred to as coffee shops, draw 1.5 million visitors per year, according to information from Haney’s office. Allowing the state’s consumption lounges to operate under a similar business model would give the businesses new economic opportunities and could serve as a draw for tourists and locals to visit struggling downtown business districts.

“Lots of people want to enjoy legal cannabis in the company of others. And many people want to do that while sipping coffee, eating a scone, or listening to music,” Haney said in a statement. “There’s absolutely no good reason from an economic, health, or safety standpoint that the state should make that illegal. If an authorized cannabis retail store wants to also sell a cup of coffee and a sandwich, we should allow cities to make that possible and stop holding back these small businesses.”

The bill would not permit cannabis consumption lounges to sell alcoholic beverages. Additionally, Haney noted that the proposal is limited to licensed consumption lounges and does not permit other types of enterprises to enter the legal cannabis market.

“To be clear, we’re not saying that coffee shops should be allowed to sell cannabis,” Haney said. “We’re saying that cannabis shops should be allowed to sell coffee. It shouldn’t be illegal for an existing cannabis business to move away from only selling marijuana and instead have the opportunity to grow, thrive and create jobs by offering coffee or live jazz.”

Bill Offers New Opportunities For Consumption Lounges

Supporters of the legislation say that Haney’s bill would give cannabis consumption lounges opportunities to grow and serve their customers. Although he has not taken a position on the legislation, Nikesh Patel, the director of San Francisco’s Office of Cannabis, said that new sources of revenue could help businesses survive in a competitive and highly regulated industry.

“We hear from our operators that it’s a very challenging time to be in the cannabis space,” said Patel. “And some of the reasons are reduced foot traffic on the streets and higher tax burdens on cannabis businesses. There is still competition with the illicit market, and the cost of flower as a whole has gone down, and that’s had a trickle effect on the entire supply chain.”

Haney’s bill does not automatically permit cannabis consumption lounges to serve food and drink or host live events. Instead, local governments would also have to approve the change for the businesses in their jurisdictions. City leaders in West Hollywood, Palm Springs and Cathedral City have already passed such ordinances, according to Haney’s office. In San Francisco, Supervisor Rafael Mandelman plans to introduce legislation on Tuesday to allow the city’s consumption lounges to take advantage of Haney’s proposal.

“I think those (current) restrictions don’t make sense and they’re not helpful to the lounges,” Mandelman said. “And I think that in terms of making those more enjoyable spaces and building out our local cannabis industry, tourism and economic developments — for all those reasons, it makes sense to take advantage of what Assemblyman Haney is putting forward.”

Before it can become law, AB 374 must first be passed by the California Assembly and state Senate before heading to the office of Democratic Governor Gavin Newsom for his consideration. Although he is unsure if the governor will sign the bill if he is given the chance, Haney said that hopes Newsom will give California’s consumption lounges a new way to succeed in a challenging business environment.

“California’s small cannabis businesses are struggling,” said Haney. “Issues like over-saturation, high taxes, and the thriving black market are hurting cannabis businesses who follow the rules and pay taxes.”

“I hope that the governor, as a small-business owner himself in the past who has been involved in the hospitality industry, can now see this as an opportunity,” he added.

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