It’s Not Easy Being Green: The Current State of Los Angeles Cannabis Licensure

By no means has commercial cannabis licensing in Los Angeles has been a smooth ride. Los Angeles decided to issue commercial cannabis licenses in three phases, each phase accepting licenses for a different segment of the cannabis industry. However, Phases 1 and 2 were both significantly delayed for various reasons, some citing the lack of staffing in the Department of Cannabis Regulation (DCR; the city agency responsible for approving licenses in Los Angeles). At the conclusion of Phase 1, Los Angeles saw a small number of retail licenses granted to businesses already operating as an “existing medical marijuana dispensary” (EMMD). Phase 2 approved another small batch of licenses for non-retail commercial cannabis activity such as cultivators, manufacturers, testing laboratories, and distributors. However, both these phases only accepted applications from those already conducting business under the Compassionate Use Act of 1996, which legalized the medicinal use of marijuana. So when do the rest of the businesses get to apply for a license?

The answer? The last phase—Phase 3.

Before too much excitement ensues, if Phase 1 and Phase 2 demonstrated anything about cannabis licensure in Los Angeles, Phase 3 will likely see some delays ridden with its own issues and problems. Phase 3, though not officially announced according to the DCR’s website, is set to open on or around September 3, 2019. The lack of clarity about when this will officially open, alone, incites some uneasiness for those waiting on when they can apply for a license. To add to the uneasiness, Phase 3, launching via Round 1 followed by Round 2, is initially only accepting applications for business owners who qualify for the Social Equity Program (SEP) and will only be for retail cannabis businesses.

The SEP is a program aimed at giving reparation to individuals who have been negatively impacted by the war on drugs. SEP applicants receive benefits such as: expedited application and renewal, fee deferrals, and business and compliance assistance. There are 3 tiers to SEP eligibility, qualification requirements and benefits varying at each tier. Since Los Angeles justclosed the window for SEP eligibility verification on July 29, 2019, applicants are now scrambling to gather all materials to submit a complete application—especially because Phase 3 licenses will be approved on a first-come-first-served basis. Submitting an incomplete application will likely be a deciding factor in obtaining license approval. Round 1 of Phase 3 and Round 2 of Phase 3, together, will only approve 250 licenses total. This means that obtaining a license before the competition is an extremely close race. 

Social Equity Program eligibility tiers.
Los Angeles Commercial Cannabis Activity Phase 3 Licensing Structure

It’s extremely important to note that California state law requires a license at the state level and at the local level, in order to conduct commercial cannabis activity. The state will not grant a license to any applicant who does not possess a local license—which makes obtaining a city license that much more important to getting a head start on a commercial cannabis business in Los Angeles. Amongst the various other aspects to consider in deciding whether one can even conduct a cannabis business in their area (the city has specific zoning restrictions and “undue concentration restrictions”), how and when someone can obtain a license can be quite overwhelming and confusing. Obtaining the aid of an attorney may be crucial and one that may turn out to be a smart long-term investment. For now, the Los Angeles commercial recreational cannabis industry, is a work-in-progress.

By Mio Asami

Cultiva Law

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