The Next Step

California’s new regulatory bureau is far from ready to allow adult cannabis sales in January. In fact, the state is estimated to be up to six months behind. To address the waiting game being played by operators with a local permit already in hand, state regulators just announced that a “temporary license” will be offered for locally-permitted operators.

According to the newly-rebranded Bureau of Cannabis Control website: “A temporary license is a conditional license that allows a business to engage in commercial cannabis activity for a period of 120 days. The Bureau can only issue a temporary license if the applicant has a valid license, permit or other authorization issued by the local jurisdiction.”

“At best, this program is vague, and at worst, it’s polarizing for retailers and vendors scrambling to comply with piecemeal local and state policies.”

One catch to the program is that only valid temporary licensees can work together, and only they will be able to serve the adult-use market. We have always known that under Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), the industry is moving away from “collectives” and toward a licensee-to-licensee model—but many assumed a more clear transitional period would be outlined. At best, this program is vague, and at worst, it’s polarizing for retailers and vendors scrambling to comply with piecemeal local and state policies.

San Diego is arguably quite prepared for legal cannabis sales. Still, little is known about the final state regulations. Licensed retail stores are open in San Diego, and 40 supply-side licenses have been approved, though applications are not yet available from the city. Therefore, the local supply chain licensing process is not expected to be completed by January.

This creates a disconnect between retailers and suppliers as they work toward compliance with MAUCRSA, and potentially, the new temporary license.

Pros & Cons

The temporary license is seen by many as a patch to fix issues in the state’s regulatory process. One of the biggest questions among cannabis retailers is whether or not it’s even worth it to apply. Getting licensed temporarily does have some benefits. It increases the legitimacy of your business by completing your transition into the regulated market, and it may push an applicant to the “front of the line” for review of the full state license application.

The downside? Once your business has a temporary license in hand, you will no longer be allowed to work with any vendors who don’t possess one. Business owners like Chris Boudreau, the founder of a permitted retail outlet in the San Diego, believe that the state is just not ready—and they’re shifting some of the burdens of regulation directly onto the industry. “Implementation is going slower than it needs to, but regulators have a state mandate: They have to start taking applications at the beginning of the year,” said Boudreau. “ . . . They’re saving political face and trying to keep the market from exploding. Why else would they do a four-month temporary license program, at the same time as we’re applying for regular licenses? It doesn’t make sense.”

With very few locally-permitted suppliers in southern California who would even qualify for a temporary license, Boudreau doesn’t know how many operators will end up applying. If restrictions are enforced, access to suppliers, distributors and testing labs would likely be severely limited.

The Vendor Issue

For retailers already actively operating in San Diego, those who are awarded temporary state licenses will probably be required to cut off any yet-unlicensed vendors and suppliers. Apothekare owner Rakesh Goyal is one of the most popular permitted storefronts in San Diego. He thinks the benefits of the temporary license speak for themselves, and he’s more than willing to do whatever it takes to cash in. He told CULTURE that he is unsure about how these licenses will affect new customers and revenue, but it’s definitely something he’s willing to consider.

Whether or not an entrepreneur chooses to pursue the temporary state license, all businesses must eventually comply with MAUCRSA in order to become legal. So, while working around the program is an option for now, operators can’t hide from regulation for long.