The Waiting Game

Up until now, California’s cannabis licensing system felt like a game of Chutes and Ladders—with every step forward, we seemed to slide a few steps back. Thankfully, however, in late November, the Bureau of Cannabis Control (BCC), the Department of Food and Agriculture (DFA), and the California Department of Public Health (DPH) released over 300 pages of emergency regulations, which were approved and became effective on Dec. 8, 2017. Each of these agencies is tasked with setting forth regulations, procedures and overseeing the application process and licensing for each of their respective license types. Specifically, the BCC oversees licenses for retailers, distributors, testing labs and microbusinesses, the DFA oversees cultivation, and the DPH oversees manufacturing. It’s a new year, a new industry. Let’s take a look into what we can expect this year in 2018!

“Once armed with local approval, a business can apply with the appropriate agency for a temporary state license with a fairly simple and small list of requirements.”

The Transition Period

The BCC imposed a transition period from Jan. 1, 2018 to July 1, 2018, to allow businesses to have leeway and to ease into compliance. During this transition period, licensees may, (1) conduct business with other licensees irrespective of their A or M (adult-use or medical) designation, and (2) sell untested, improperly-packaged products and cannabis goods that do not meet proper THC limits so long as certain precautions are taken. But beware—licensing does have its consequences, as it will trigger a requirement that licensed businesses only conduct business with other licensed businesses. Depending on the licensing status of a business’ suppliers or customers, this requirement can duly act as an incentive or a deterrent to go through with licensing.

Everything is Temporary—But First, Local Approval

Any applicant at the state level must have a permit or authorization from their local municipality to operate a cannabis business before a California license will be granted. Local authorization—check!

Once armed with local approval, a business can apply with the appropriate agency for a temporary state license with a fairly simple and small list of requirements. Temporary license applications will require simple information—local approval, name, address, type of license desired, a premises diagram and a local authorization.

Once approved, temporary licenses have an effective date of Jan. 1, 2018, and are valid for 120 days with the ability to be extended for periods of 90 days if so required. For a full-blown annual license, the state requires a more in-depth look at business operations with a fully detailed application complete with standard operating procedures, security plans and financials.

Los Angeles Passes Cannabis Regulations and Process

In November 2017, the city of Los Angeles released a new version of the draft regulations almost every week. Then, almost exactly in step with the state’s progress, on Dec. 5, 2017, Los Angeles City Council finally passed an ordinance creating a more detailed regulatory framework for commercial cannabis businesses.

Thereunder, Los Angeles gives licensing priority to Proposition M applicants—qualified Pre-ICO, Proposition  D-compliant businesses. In addition, Los Angeles’ new social equity program gives priority to non-retailers who qualify for three categorical tiers of “social equity” meaning they are of low income, have a prior California cannabis conviction, and reside in the eligible impoverished districts and incubators for social equity applicants.

Amongst the application process set forth by the Council, starting Jan. 1, it continues to be unlawful under local law to operate without a local license or limited immunity in Los Angeles. Along with those regulations, Prop. D is to stay in full force and effect until it is formally repealed on or around April 1, 2018. Thereafter, any person could be held liable for violating Prop. M and, amongst other expensive consequences, would be ineligible to apply for Los Angeles city licensing for a period of five years.

According to the city, the complex regulations passed on Dec. 5, 2017 are considered a work in progress that will likely need refinement later, but for now, they provide the cannabis industry with some clarity.

Although it seems like the closer we get to clarity, the muddier it becomes, we must continue to influence policymakers and encourage the de-stigmatization of cannabis.