Cannabis Compliance: Operating Legally in California in 2018

Posted by Margolin & Lawrence on April 10, 2018

California’s transition into a regulated market has many operators wondering what the universe of compliance looks like and where they fit into the process. In order to operate legally in California after January 1, 2018, you need both a local authorization and a state license. Temporary licenses from the state of California are sufficient to continue operating, though you will eventually need to obtain an Annual License. To date, 954 cannabis businesses in California have received Cease and Desist letters from the Bureau of Cannabis Control. While some were in error, others were operating without the required licenses for California.

It’s important to understand that licensure is not the end-all-be-all of compliance -- in fact, it is the minimum requirement for your business to operate legally. In addition to having a state license (which requires local authorization), you will need to begin thinking about how to set up your business with compliance processes that facilitate and enable adherence to state regulations for your activities: cannabis microbusiness, retail, manufacturing, cultivation or testing. The below infographic is an overview of the entire licensing/compliance process.

Where does your business fit in?


As you can see, you will need to begin preparing not only your annual license application but also your internal compliance processes once you have been granted the California Temporary State License. The annual license application will outline how your business will comply and it will be up to you to set up internal systems that govern compliance within your company and ensure that your employees are fully trained on the new regulations and ensuring that your business complies with them.  

Highly regulated industries like financial services and life sciences have had to comply with regulations for decades, and many have built out sophisticated compliance departments and processes. What can we learn from them? Monitoring, prevention and reporting require processes, training, and technology. You can rely on individual actors to know all the rules automatically and how to maintain compliance with them.

If you would like to speak with one of our regulatory attorneys about building out an internal compliance program for your company, CONTACT US.

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.