L.A. Cannabis Licensing: A Waiting Game

Posted by Margolin & Lawrence on February 8, 2018

It’s been over a month since the state of California began issuing licenses for commercial cannabis businesses. The epicenter of this emerging legal market is right here in Los Angeles. While the City passed their final ordinance in December, the licensing process has been off to a slow start.

The agency that regulates cannabis in Los Angeles, the Department of Cannabis Regulations (DCR) has begun to issue licenses for Phase 1 existing dispensaries. These applicants can apply through a streamlined process for a temporary license which allows them to then apply for a temporary state license and operate legally in the City. At this moment, there are 98 eligible businesses operating in Los Angeles with Temporary Approval from the DCR for Local Operation – in other words, a temporary license for legal cannabis activity.

Los Angeles’ Department of Cannabis Regulations has divided cannabis applications into three distinct phases, each with their own set of criteria to qualify. Phase 1 will remain open through March 4, 2018. This is the most exclusive phase with likely only 200 or so stores qualifying. The current phase is reserved for applicants who are candidates for “Proposition M Priority Processing”, which comes with a strict set of requirements that effectively limit eligibility to preexisting medical marijuana dispensaries. For this reason, existing operators working in cultivation and manufacturing and entrepreneurs looking to launch new businesses are eagerly awaiting Phase 2. Under the Los Angeles Ordinance, Phase 2 is supposed to end in early April 2018. For this reason, we expected applications to open for Phase 2 in early February. We have contacted the DCR almost daily, and as of yesterday, there was still no time estimate on when Phase 2 licensing applications will open.

When it does begin, Phase 2 will require that applicants have a preexisting cannabis business – it’s reserved for “Non-Retailer Commercial Cannabis Activity Prior to January 1, 2016 Processing.” To qualify, a business must meet the following standards, as imposed by the LA Municipal Code:

1) the Applicant was engaged prior to January 1,2016, in the same Non-Retailer Commercial Cannabis Activity that it now seeks a License for; 2) the Applicant provides evidence and attests under penalty of perjury that it was a supplier to an EMMD prior to January 1, 2017; 3) the Business Premises meets all of the land use and sensitive use requirements of Article 5 of Chapter X of this Code; 4) the Applicant passes a prelicense inspection; 5) there are no fire or life safety violations on the Business Premises: 6) the Applicant paid all outstanding City business tax obligations; 7) the Applicant 13 indemnifies the City from any potential liability on a form approved by DCR; 8) the Applicant provides a written agreement with a testing laboratory for testing of all Cannabis and Cannabis products and attests to testing all of its Cannabis and Cannabis products in accordance with state standards; 9) the Applicant is not engaged in Retailer Commercial Cannabis Activity at the Business Premises; 10) the Applicant attests that it will cease all operations if denied a State license or City License; 11) the Applicant qualifies under the Social Equity Program; and 12) the Applicant attests that it will comply with all operating requirements imposed by DCR and that DCR may immediately suspend or revoke the Temporary Approval if the Applicant fails to abide by any City operating requirement.

Of these criteria, an essential component is the Social Equity Program; not only is it still in development by the city, but it also divides candidates into separate tiers within the program itself, which could add further complications to the application process.

Market Volatility & new Cryptocurrency Regulations on the Horizon? 

Posted by Margolin & Lawrence on February 6, 2018

Market volatility sent many investors reeling yesterday, with the dow plunging over 1,000 points. Cryptocurrency, a digital asset that is popular with cannabis entrepreneurs, was not spared. As of today, Bitcoin is trading at $7,049 per USD, down from over $18,000 a few weeks ago. Those familiar with cryptocurrency know that Bitcoin is only one type of asset, and that in fact there are multiple currencies available. One in particular, may be a potential solution to the cannabis industry’s banking crisis: PotCoin. Our Los Angeles cannabis attorneys are following developments in cryptocurrency closely and monitoring progress as regulations catch up with technology, and the state works towards a banking solution for cannabis operators. In fact, just this week, the U.S. Senate in conjunction with the SEC and the CFTC held a discussion titled “Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.” We will cover the results of this discussion in a future post.

One of the first cryptocurrencies to ever enter the market as a cannabis coin, PotCoin, was launched on January 21st, 2014. Back then, cryptocurrencies and their applications were widely regarded by the public as a space that catered to the underground, illicit economy of the world. Potcoin describes itself as “the first digital currency created to facilitate transactions within the legalized cannabis industry.” Established around the same time as cannabis legalization in Colorado, PotCoin positioned itself as an alternative to banking, even going so as far as to installing PotCoin ATM machines at a few locations. Now that the marijuana revolution in our country has garnered more support than ever, these cannabis cryptocurrencies will undoubtedly be brought up for legitimate discussion once again. Currently, PotCoin is valued much lower than Bitcoin at $0.129 USD at the time of publishing this article.

How does PotCoin differ from Bitcoin? PotCoin runs on a “proof of stake” system, as opposed to Bitcoin, which runs on a “proof of work” system. This means that the individual or entity mining for PotCoin does not need an all-powerful computer with intense graphics cards, but a certain stake or ownership of the currency to mine it. This eliminates all the expensive hardware associated with the “proof of work” system, and validates the blockchain more efficiently. Through blockchain technology, PotCoins are verified while still efficiently eliminating the double-spending problem. The largest issue that PotCoin faces is one of network scalability and transaction speeds. These are both issues that the development team for PotCoin are fervently trying to solve. Whether or not PotCoin will make its mark on the economy of cannabis is contingent on how the development team addresses these key issues.

With a multitude of states on the path towards the legalization of cannabis, it will be interesting to see whether or not the cannabis industry will adopt PotCoin as a potential solution to the banking quandary and certainly the development issues above will be determinative of whether PotCoin is up to the challenge. 

How Do I Find a Compliant Cannabis Property in Los Angeles?

Posted by Margolin & Lawrence on January 25, 2018

As cannabis entrepreneurs and investors learn about the legal requirements to operate a compliant cannabis business, the next question many arrive at is - so how do I find a compliant property?

Culver City To Begin Cannabis Licensing

Posted by Margolin & Lawrence on January 23, 2018

 

Last night at a packed City Council meeting, Culver City approved a new cannabis public health regulatory ordinance. The vote was unanimous, 5-0, which seemed to take some councilmembers by surprise.  The new ordinance amended Culver City’s Municipal Code Chapter 11.17 on commercial cannabis businesses, adding a new subchapter which adopted, by reference, Los Angeles County’s ordinance on the subject. In other words, Culver City basically adopted the ordinance that L.A. County already had researched and implemented.

One speaker pointed out at last night’s meeting that Culver City took a smart procedural shortcut in adopting L.A. County’s well-thought-out ordinance. Perhaps this is something the other 85 or so cities in Los Angeles County who have not passed cannabis ordinances yet should consider. 

No Reason to Panic Over Attorney General Jeff Sessions' Announcement

Posted by Margolin & Lawrence on January 15, 2018

On January 4, Jeff Sessions’ Justice Department issued a new Memo on Marijuana Enforcement that has left many people in states that allow marijuana confused or worried.  The feds dropped this news just as California and its many cities are getting their new cannabis regulation systems going.  For the first time in California, cannabis will be grown, distributed, and sold in a highly regulated environment.  Substantial new tax money and jobs will be created in the state.  Many have wondered, should they scrap their cannabis licensing plans and pick a new line of work?

Ask A Cannabis Trademark Lawyer: How Do I Apply For A State Trademark?

Posted by Margolin & Lawrence on January 9, 2018

 As of January 1st, 2018, the long wait is over: cannabis business owners can apply for California state trademarks. The application form can be obtained here: http://bpd.cdn.sos.ca.gov/ts/forms/tm-100.pdf. Because cannabis is still federally illegal and cannabis products themselves cannot be trademarked, this is a viable avenue for many California cannabis brands that will protect your business marks within the state. You can read our prior post about USPTO Trademarks here.

According to the website for the Office of the California Secretary of State:

“Beginning January 1, 2018, customers may register their cannabis-related Trademark or Service Mark with the California Secretary of State's office so long as:

1.The mark is lawfully in use in commerce within California; and 

2.Matches the classification of goods and services adopted by the United States Patent and Trademark Office.  

If the application submitted to register a Trademark or Service Mark is found deficient, the application will be returned to the registrant for correction.

Note: Not all cannabis-related products can be registered under current law due to the inability to meet federal classifications.”

This means that in order to obtain your state marks, you must be lawfully using the marks in commerce at the time of the application. Therefore, you will need to be licensed in compliance with SB 94,  both at the local and state level, before you’re eligible for trademark approval. Otherwise, if you claim an unlicensed use, you may run into issues with the Secretary of State. Further, once your license is obtained, you must also show that you’re making actual, bona fide use of the trademarks on your products in the stream of commerce. That means that customers are identifying you by your brand when they purchase your goods or services in the marketplace.

Ask An LA Cannabis Attorney: Do I need a cannabis water permit?

Posted by Margolin & Lawrence on January 4, 2018

The complex cannabis regulations that have been rolled out by local and state governments across California means that as a cannabis operator you will be working with a number of different regulatory agencies. The rules for many of the cannabis activities are promulgated by different agencies - for example, the Bureau of Cannabis Control regulates retail, distribution and delivery in the state of California, while CalCannabis (a division of the CDFA) regulates cannabis cultivation in the state. One area of great confusion for many cannabis cultivators that our Los Angeles cannabis attorneys have been fielding questions on is the issue of obtaining a state water license. The regulations for water were passed in October, and the application portal is currently open to apply for a water permit. The water policy aims to protect California's natural streams and bodies of water from pollution and prevent diversion of water for cannabis cultivation. 

On October 17, 2017, the State Water Board adopted a state-wide policy establishing strict environmental standards for cannabis cultivation. The state-wide policy is designed to protect water flows and water quality in the state of California. All cannabis cultivators will need to comply with this state-wide policy. In addition to complying with the Water Board’s state-wide policy, cultivators will need to comply with all other state, federal and local laws.

The state-wide policy will be implemented through a water quality permit known as the Cannabis General Order and through conditions for cannabis-related water rights known as Cannabis Small Irrigation Use Registration.

All cultivators will need to register their water right and water discharge using the Water Board’s online portal. The Water Board’s online portal can be found here. Depending on the cultivator’s water source, the state-wide policy may or may not apply to them.

To see the cannabis cultivation policy, click here. If you are a cannabis cultivator and have questions relating to the state-wide policy, Contact us! to speak with one of our cannabis attorneys. 

Ask an LA Cannabis Attorney: Can Existing LA Dispensaries Stay Open?

Posted by Margolin & Lawrence on January 2, 2018

2018 is here, and there is a lot of confusion in Los Angeles about the new cannabis laws. The question causing the most confusion is whether existing operators can stay open. Under Measure M, existing dispensaries with BTRCs who comply with Proposition D still have limited immunity until they are licensed. Under state law, a retailer needs a state and local license in order to conduct commercial cannabis activity. The City is currently holding a press conference on the issue and we will update our blog as this issue develops. Our LA cannabis attorneys give their opinion on the matter below. 

Update: At 1pm today, the City confirmed via a press conference that EMMD cannabis retailers in Los Angeles can remain open through the licensing process. 

For years under California state law, commercial marijuana activity has been limited to medical dispensaries and cultivation sites organized as non-profit collectives or cooperatives.  The City of Los Angeles has allowed medical marijuana dispensaries to operate in the City under various sets of rules, most recently under Proposition D, which passed in 2013 and provided immunity from a general ban on commercial cannabis activity to a specific group of medical marijuana dispensaries that have been in operation since 2007 and met various other requirements.

Under California’s Proposition 64, which passed in 2016, starting January 1, 2018, Californians are allowed to commercially grow, distribute, and sell both medical and non-medical marijuana, but only to the extent allowed by local governments (cities, or for those in unincorporated areas, counties).   The City of Los Angeles has a new system for regulating commercial cannabis activity, Measure M and portions of the Los Angeles Municipal Code implementing Measure M, which will allow for both medical and non-medical commercial cannabis.  It is expected that Los Angeles will begin open up its applications on January 3, and begin issuing licenses within a few weeks after that.  Under the terms of Measure M, the provisions of Proposition D were repealed beginning January 1, 2018.

Many have asked whether existing commercial cannabis businesses are allowed to continue operating under the old system of rules, until they are able to secure licenses in the new system.  Existing commercial marijuana dispensaries will retain their legal protection under state and local law, so long as they submit their applications for the new system within the time window provided by the City.  Los Angeles has announced that, for the first 60 days after opening its applications, only existing commercial cannabis businesses will be able to apply for licenses, in a “priority” round, and after this 60-day period, new commercial cannabis businesses will be eligible to apply for licenses.  Measure M makes clear that  existing medical dispensaries can continue operation after January 1, 2018, and need not shut down before applying for licenses, as long as they operate as non-profit collectives, follow all the rules set forth in Proposition D, and submit their applications for licenses within the 60-day priority period.

 Measure M describes this protection as follows: “An existing medical marijuana dispensary (“EMMD”) that is operating in compliance with the limited immunity provisions (Los Angeles Municipal Code Section 45.19.6.3) and tax provisions (Los Angeles Municipal Code Section 21.50) of Proposition D, may continue to operate within the City at the one location identified in its original or amended business tax registration certificate until such time that the EMMD applies for and receives a final response to its application for a City permit or license for commercial cannabis activity being conducted at that location. The City's designated licensing or permitting agency shall give priority in processing applications of EMMDs that can demonstrate to the City’s designated licensing or permitting agency that the EMMD has operated in compliance with the limited immunity and tax provisions of Proposition D. To avail itself of the terms of this Section, including the priority processing, an EMMD must apply for a City permit or license within sixty calendar days of the first date that applications are made available for commercial cannabis activity. If the City issues the EMMD a license or permit for commercial cannabis activity, the EMMD shall continue to operate at its location within the City in accordance with the rules and regulations set forth by the City."

California state law also provides that the provision giving legal protection to medical marijuana patient collectives and cooperatives, Health & Safety Code section 11362.775, will sunset one year after the State begins issuing cannabis licenses.  Until this law goes away, patients will still receive protection under state law for non-profit, collective cannabis activity.

 Accordingly, existing medical marijuana dispensaries in Los Angeles may continue operating  under California’s medical marijuana non-profit collective laws, and Los Angeles’s Proposition D, as long as they submit their applications for licenses during the 60-day priority period.

 For medical marijuana cultivators, manufacturers, and distributors not located at one of the Proposition D dispensaries, there is no explicit protection under Los Angeles law for continued operation pending licensing.  Los Angeles has, however, provided a priority licensing system for these existing  non-retail businesses that have been around since before 2016 and supplying a Proposition D dispensary since before 2017.  This suggests that the City does not intend to prosecute such businesses in current operation, but until these businesses retain licenses from Los Angeles, they face some risk of being prosecuted. 

If you are confused Contact us!to speak with one of our cannabis attorneys who can provide clarity on these issues and the cannabis licensing process. 

CA Cannabis Licensing Explained in 2 Minutes - Video

Posted by Margolin & Lawrence on December 31, 2017

As we prepare for January 1 and recreational cannabis in California, many legal questions remain for cannabis businesses. In this video, Los Angeles Cannabis Attorneys Margolin & Lawrence explain the local and state licensing process for cannabis businesses in California. If you are looking for a high level overview of what you will need to do to start a cannabis business, or get your existing cannabis business into compliance, this is the place to start.

Breaking News: LA County Releases Proposed Cannabis Regulations

Posted by Margolin & Lawrence on December 19, 2017

L.A. County released long-awaited draft cannabis regulations yesterday. The Board of Supervisors, which creates laws that govern all of the unincorporated areas of the county (any area that is not part of an incorporated city) has been listening to the findings of the Cannabis Advisory Group over many months and has released the zoning requirements that will apply to commercial cannabis in the county, as well as the activities that will be licensed.The County will be issuing for Adult-Use (recreational) and Medical cannabis uses. Our LA cannabis attorneys have reviewed the proposed cannabis regulations and our findings are below. 

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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.