The flood gates are about to open for California’s new commercial cannabis industry, as the state rushes to issue temporary licenses for businesses looking to open on Jan. 1.
California delivered its first batch of commercial cannabis licenses last week with the approval of 30 temporary licenses for cannabis businesses across the state.
The state is entering uncharted territory as licensing for dispensaries, manufacturers, and cultivators in California’s new commercial cannabis market goes live.
During the first weeks, 286 businesses applied for temporary licenses and nearly 2,200 entities have registered online as prospective businesses, according to the Bureau of Cannabis Control.
By comparison, Colorado and Washington — the first two states to begin recreational cannabis sales in 2014 — have licensed 1,550 and 1,900 retail businesses, respectively.
On Dec. 8, the Secretary of State’s Office launched the online “Cannabizfile” application program in anticipation of a high volume of cannabis retailers, manufacturers and testing facilities that plan to open their doors in California.
Meanwhile, the California Department of Food and Agriculture, which has jurisdiction over growers, opened it’s doors to temporary license applications this week.
The temporary licenses are valid for 120 days. That gives state authorities more time to develop the final, annual permitting process. The temporary licenses go into effect Jan. 1.
Come New Year’s Day, the state is entering uncharted territory as licensing for dispensaries, manufacturers, and cultivators in California’s new commercial cannabis market goes live.
Retailers will still be prohibited from selling edible products that exceed more than the 10 miligrams of THC per serving, according to the Public Health Department.
The state is granting some leniency with product regulations during the first six months of sales, according to the state Department of Public Health, which also has a role in cannabis regulation.
But retailers will be allowed to sell and transport goods that have not been tested, at least initially, and won’t be held to labeling requirements, as long as a sticker with an “appropriate warning statement” notifying that the product has not been tested is attached. That means that untested cannabis products that don’t meet per-pack rules on tetrahydrocannabinol (THC), the psychoactive ingredient in marijuana, may find their way onto dispensary shelves during the early months of legal sales.
However, retailers will still be prohibited from selling edible products that exceed more than the 10 miligrams of THC per serving, according to the Public Health Department.
While the looser regulations are intended to smooth the transition period, others fear that it could provide an opening for black-[market dealers to enter into the medical and adult-use market.
“There’s nothing that a cultivator needs to do other than have their license and issue a receipt to their distributor. — Richard Parrott
“There’s going to be leakage into the system from the illegal market, there’s millions of pounds out there that are waiting,” said Dale Schafer, an attorney who specializes in cannabis business law.
“Anything that’s in your inventory at that time you get that permit, you can run it through your systems, packagage up. It can’t be more than 10 miligrams (of THC) for edibles … but you can move that through.”
A set of “emergency regulations” that arrived in November make way for cultivators to sell either A-permit (adult-use cannabis) or M-permit (medical cannabis) products to any dispensary, medical or recreational, that holds a state license.
“There’s current product that may or may not comply with those requirements, so they’re allowing this transition period,” said Richard Parrott, director of the California Department of Food and Agriculture, at a recent licensing workshop in Woodland.
“There’s nothing that a cultivator needs to do other than have their license and issue a receipt to their distributor, as long as that distributor is licensed,” he added.
Parrott said the California Department of Food and Agriculture intends to inspect annually every cannabis cultivator in the state. The department currently has only have three agents on staff, with plans to hire more in 2018.
The only other mechanism to prevent illegal activity is the CalCannabis’ complaint hotline (1-833-WEED-TIP), which is intended to support local jurisdictions and commercial growers.
In the meantime, the Bureau of Cannabis Control is in high gear through the end of the year, aiming to process as many of the applications as possible before the licenses go into effect on Jan. 1.
“We’re going to be crazy, just as we are now. We’re going to be pushing ahead and trying to get as many people in the system as we can,” said bureau spokesman Alex Traverso.
The recent licenses also come free of charge, unlike the planned annual permits.
The annual permits are expected to come with a $1,000 application fee, as well as a $2,000-to-$75,000 licensing fee pegged to gross revenue.
According to Traverso, the state is still developing plans to accept these large amounts of cash, as cannabis businesses typically are unable to use federally-insured banking services.
Applicants also are vetted with background checks and verification to show that they have permission from local jurisdictions to operate.
“There’s no limit from the state on licenses given out, right now the only limits are if the local governments aren’t ready to give out permits,” Traverso said. “If a local jurisdiction is ready on Jan. 1 that doesn’t mean an applicant will be prevented from getting (a license) down the line.”
Among the patchwork of cannabis policies across the state, only Butte, San Luis Obispo, Lassen, Siskiyou, and Yuba counties have declined to take any action outside of the state law set up by Proposition 64, which voters approved in November 2016.
Dozens of cannabis ordinances are still in progress across California’s 53 other counties, granting or denying permissions for dispensaries, manufacturers, cultivators, and testing facilities to operate, according to the California State Association of Counties.