On January 1, California will begin issuing licenses allowing businesses to legally sell marijuana for recreational use. It is estimated that recreational marijuana sales will command about 60 percent of the state’s pot market — accounting for about $5 billion in annual sales. For anyone looking to step into the cultivation industry, this is a great opportunity. Here are a few key things an entrepreneur looking to operate in the cannabis industry should know about the new regulatory environment.
The Marijuana programs are being operated by the following authorities (click on links for more details):
- The California Department of Food and Agriculture (CDFA) is responsible for Cultivator/Processor licensing program in California, collectively referred to as CalCannabisLicensing.
- The Bureau of Medical Cannabis Regulation is responsible for licensing cannabis Laboratories, Transporters, Distributors, Dispensaries, and Micro-Businesses in California.
- The Office of Manufactured Cannabis Safety is responsible for licensing cannabis Manufacturers in California.
License Approval process
In order to receive a license from the state, busineses first need to first show that they are compliant with their local municipality. Currently, it is hard to find local jurisdictions that are making it easy for businesses in the industry to obtain licenses. A few smaller cities realize the potential for tremendous tax revenue and are welcoming cannabis businesses, but most are struggling with competing constituencies and are not approving a lot of applications.
When the state receives an application for licensure, they will contact the local jurisdiction in which the business is applying. The local municipality will have 60 days to report to the state on whether or not they're currently compliant. If the local municipality says the business is not compliant, the application will automatically be rejected.
Additionally, prior to receiving a license, applicants must submit fingerprints and pass a general background check. Licenses will not be issued to persons convicted of certain felonies.
Types of licenses
It's surprising that the sale of medical marijuana has been legal in California for 21 years, but it has been always hard for business to start an operation due to the lack of a comprehensive regulatory system in the state. However, with new laws being implemented, the state is putting together a standard licensing system.
The state will issue 20 types of licenses in all, with main categories of licenses for retail, distribution, testing, manufacturing, cultivating and micro-businesses (a type of vertially integrated license that allow businesses to engage in multiple stages of the supply chain on a small scale).
The types of licenses issued will be the same for medicinal and recreational use. Subject to certain restrictions, applicants will be able to simultaneously apply for and receive multiple types of licenses.
While the regulations applicable to each type of licensee vary, some of the more noteworthy provisions include:
- Marijuana delivery services are allowed. While retailers must have a physical location, they can establish premises that are closed to the public and conduct sales to customers exclusively through delivery. These services can be conducted through online platforms (as long as the platforms are owned and operated by the licensee).
- Onsite consumption facilities are now allowed, but only if the local jurisdiction in which the seller operates allows it. Additionally, these consumption areas must be restricted to persons 21 or older, consumption cannot be visible from any public place, and the sale or consumption of alcohol or tobacco cannot be permitted on the premises.
- Certain rules will apply specifically to edibles. Edibles cannot be designed to be appealing to children or confused with regular food, cannot exceed 10 mg THC per serving, must be marked with a universal symbol (to be determined by the Department of Public Health), and will be subject to certain quality control standards.
- Prohibitions on location. Businesses cannot be located within 600 feet of a school, day care or youth center. Local zoning ordinances and regulations may also affect where businesses can be located.
- No residency requirement. Out-of-state businesses can apply for licenses to have operations in the state.
- Priority status. Applicants that were already operating under the State’s prior medicinal marijuana laws before September 1, 2016 will be given priority status in the issuance of these new licenses.