On September 22, 2017, the City of Los Angeles released Revised Draft Requirements for Commercial Cannabis Activity in the City. Our LA cannabis lawyers have analyzed the regulations and compared them to the June 2017 draft, and there are drastic differences that will affect large portions of the thousands of cannabis operators within the City.
The major change is that only dispensaries will be allowed to apply first - under Priority licensing - to the City. Originally, cultivators and manufacturers that could prove they had been operating since before January 1, 2016, were going to be able to apply along with dispensaries who had a 2016 or 2017 business tax registration certificate from the City (BTRC). Now, all cultivators and manufacturers will apply in the Social Equity or General Processing round, which will be held at the same time.
The number of dispensaries that will qualify for priority has been expanded to include dispensaries in compliance with the current medical marijuana laws that have a 2015 or later BTRC, in addition to those that have a 2016 or 2017 BTRC (the original group that would receive priority). You can read more about the prior draft here.
Additionally, cultivators and manufacturers who could prove operation before 2016 under the June regulations were going to be able to receive certificates of compliance that allowed them to continue operating. This is no longer the case. Only dispensaries that are preexisting and meet the criteria will be authorized to continue operations under the current draft.
The changes are good news for new operators looking to enter the legal cannabis market in Los Angeles. Now, because existing cultivators and manufacturers no longer have priority, new operations will be able to apply at the same time.
The changes, however, could cause substantial damages to current cultivators who comply with State law, and who have invested resources in current cultivation operations in reliance upon the current legal framework. These operators would be forced to unexpectedly shut down. This could lead to expensive and time-consuming litigation against the City, and the destruction of many responsible businesses and jobs.
Additionally, the new regulations allow for up to 1.5 acres of cultivation, which will mean that larger operators may dominate the Los Angeles market.
Many of these changes, particularly the limiting of priority to only existing dispensaries, do not seem to reflect the public comment period that took place over the summer. The City’s Regulators made some changes to level the playing field for new operators, but these changes could cause substantial financial harm to existing responsible operators, who would be forced to shut down operations and lose significant resources invested in reliance on the current and prior draft regulations. The City should consider some provision allowing current responsible cultivators, who have built the Los Angeles market and have been complying with State law, to continue operation, perhaps in the form of a point system.We were at the City Council meeting today, Monday, September 25, 2017 and will publish an update soon. If you are an LA dispensary owner and need advice on whether you will qualify for priority licensing to speak with one of our LA cannabis attorneys.