While there has been much debate over LA’s recent Draft Regulations, not much has been stated clearly about how to prepare for the LA license application process. You can read more about the draft regulations here, here, and here. Below is some guidance from our Los Angeles Cannabis Attorneys. As you know from our previous posts on SB 94, you will need City or County authorization in order to apply for a State License. The areas you can start preparing for fall into a few main categories: real estate, taxes, corporate documents and financial planning.
This past Monday, the Los Angeles City Council held an open meeting of its Rules, Elections, and Intergovernmental Relations Committee on the subject of the city’s cannabis regulations. Our LA cannabis lawyers were present to comment on the new draft and urge the City to take a reasonable, fair, and business-oriented approach to regulation. To the disappointment of many of Los Angeles' cannabis stakeholders, the city has not yet drafted its final cannabis ordinance, and has yet to even set a date for the completion of said ordinance. Though under Measure M this was supposed to pass by September 30, that deadline is about to come and go.
As the LA Times reported, the current situation and the new draft regulations leave the city’s existing marijuana businesses (particularly existing cultivators and manufacturers) in a precarious situation. Without a clear path toward legally sanctioned operations under the new cannabis ordinance, their businesses could be forced to shut down to avoid violating the law. Beyond the obvious financial hardship, inconvenience, and legal risk, this unclear state of affairs for marijuana activity presents a business hazard: With real estate prices in Los Angeles at record levels, a property that’s zoned for cannabis activity, but not allowed to operate, can quickly become a white elephant with overhead expenses large enough to drive its owner out of business.
Council members responded to the concerns of those in attendance, saying that, although they had not made an official recommendation to the city on how to proceed, they hoped to find a solution that satisfied the existing industry’s needs. Politically, the situation is a difficult one: While it makes sense to give marijuana operators priority in licensing commensurate with their compliance with previous laws, detractors argue that this could be interpreted as rewarding grey-market or outright illegal activity. Either way, some constituents are bound to be unhappy. Moreover, the situation is characterized by pervasive uncertainty: this regulation is still a draft, and there could be still more changes on the way before a final ordinance is passed.
For Los Angeles to pave the way for a sustainable legal cannabis industry, the council members will have to respond to these concerns – and do so quickly, before the uncertainty of the current situation takes its toll on existing cannabis businesses.
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.
Under California’s SB-94 (aka MAUCRSA), the retail sale of marijuana products to consumers is only legal if the business owner holds a license for cannabis distribution. Since this covers all sales of cannabis products, from marijuana proper to derivatives like hash oil and CBD, these licenses are in high demand. Many clients often ask our cannabis lawyers what happened to the Transportation license. This was a license type under the MCRSA but that provision was repealed in SB 94 and the activities covered by the old Transportation license have now been merged into the Distribution license. So, the state license is now for the same activity but under a different name.
In order to qualify for the state license, your business must first hold a local license (or local authorization), which can only be granted by the municipality the business intends to operate in. For those eager to enter the world of cannabis distribution, the question is: which cities are giving out these licenses? Here are a few cities that have distribution in their ordinance and are either already issuing distribution licenses or are on the road towards doing so:
- California City
- Cathedral City
- Desert Hot Springs
- Long Beach
- Los Angeles (expected* but we will have to wait for the Ordinance to be sure)
- Nevada City
An ordinance does not necessarily mean that it will be easy to secure a license. Many cities put heavy restrictions on how many distribution licenses will be granted, and the regulations that must be complied with are robust.
Regarding Los Angeles, all indications appear that LA will allow this cannabis activity. However, the City has until September 30th to promulgate an ordinance, and we will not know for sure until we see the final version. The fact that they have included distribution in the draft location ordinance (which you can read more about here and here) and in the operating requirements suggests that they will. Stay tuned for updates from our LA cannabis attorneys as the City’s local regulations take shape.
One of the hot topics within the LA cannabis community is priority licensing. In this post, our LA cannabis attorneys will explain what priority licensing is within the city’s licensing schema, and who qualifies for it. A recently released survey from the State Department of Agriculture found that there were 2,718 cannabis operators in LA County interested in obtaining licensing for their business. Of course, the County of LA still has a ban in place on all cannabis activity which applies to unincorporated areas. For those operators who are located within the City, you may qualify for priority licensing if you were conducting cultivation or manufacturing within the city limits before January 1, 2016 and can prove it; or, if you are a dispensary and can show a valid 2016 or 2017 BTRC for your place of business. You can read more about what evidence you can use to qualify for priority here and more about LA's zoning requirements here. In other words, you don't have to have been around for centuries, as long as you can show continuous operation from the past 21 months and meet the City's other requirements.
Los Angeles cannabis lawyers are often asked "but what about CBD?"; this post is part 2 of our series on the extract.
As a derivative of cannabis, CBD is currently considered a schedule I controlled substance. However, although cannabidiol has psychoactive effects, it’s very different in effect to other, better-known cannabinoids such as THC; CBD doesn’t produce a mentally altered state or any type of euphoric ‘high.’ Instead, its main purpose lies in its wide variety of therapeutic uses. The Huffington Post writes that “CBD is a powerful anti-epileptic, anti-depressant, anti-inflammatory, anti-nauseate, sleep aid, muscle relaxant, sedative and anti-proliferative.” In other words, distilled CBD is a broadly useful form of medical marijuana that comes without traditional marijuana’s ‘drug-like’ effects. This explains why the FDA is willing to label it “beneficial.”
Of course, the medicinal value of CBD doesn’t exactly come as a surprise. As the NORML foundation writes in its statement on the FDA’s request for comment, “Seventeen states explicitly recognize [...] CBD as a therapeutic agent. Safety trials have determined the substance to be non-toxic and well-tolerated in human subjects and even the head of the US National Institute on Drug Abuse has publicly acknowledged that CBD is ‘a safe drug with no addictive effects.’” In other words, CBD is already widely understood to be beneficial. However, having the Food & Drug Administration call it “beneficial” may prove useful to the effort to have it legalized.
Despite the acceptance of CBD use in individual states, the current policy of the U.S. Justice Department, as led by Trump administration Attorney General Jeff Sessions, is to treat all forms of marijuana as schedule I controlled substances. (For more information on the current legal status of marijuana, consult our “Do I Need a Cannabis Lawyer?” blog post and California Cannabis Law FAQ.) The DEA issued a clarification in December 2016 confirming its position that it considers CBD a Schedule I substance.
This statement by the FDA might complicate that strategy, as would a WHO decision in favor of easing international restrictions on CBD: If one branch of the federal government believes that derivatives of marijuana can be straightforwardly beneficial, another branch treating them the same as dangerous narcotics doesn’t seem reasonable. In this sense, the text of the FDA’s request may be an asset to U.S. groups seeking an end to marijuana prohibition.
Cannabis, via a wide variety of consumption methods and in a myriad of forms, has a long history of use as a pain reliever. In this post, our los angeles cannabis lawyers tackle the topicals and Type 6 non-volatile cannabis manufacturing licenses.
Los Angeles cannabis lawyer Allison Margolin spoke at the State of Marijuana conference this past weekend. In this video clip, she gives an overview of the cannabis licensing process in California. If you haven't heard, you need to get local authorization (which can mean a license or something less official like local government officials signing off on your project to the state) in order to apply for a California cannabis license when it becomes available January 1, 2018. Our cannabis attorneys are familiar with local jurisdictions statewide and are actively advising our clients on the nuances and complexities of zoning, the application process, and compliance with local ordinances.
In a letter published today, the Los Angeles City Council’s Rules, Elections, and Intergovernmental Relations Committee (Rules Committee) advised the City Planning Department that they support the allowance of Type 7 (so called "volatile") manufacturing within the City of LA. The letter represents a signficant policy shift on the City's part, since the Draft Operating Requirements released in June only allowed for non-volatile. Our Los Angeles cannabis attorneys are often asked what the difference is - any extraction process that uses flammable substances (including CO2) is considered "volatile" and would require a Type 7 license from the state. These labs are also subject to stringent safety requirements, which are discussed further in our prior post on volatile manufacturing.
In addition to the City of Los Angeles Public Comment hearing on Measure M last night, Bellflower's City Council held a meeting this week. On Monday night, the main room where the night's public discussion was scheduled was filled to capacity. The crowd was drawn to the meeting by one of the subjects on the city council's agenda for that night: Bellflower's approach to cannabis. As one of only three cities in LA county (along with Long Beach and Maywood) that have passed a cannabis ordinance and are either issuing licensing or about to, there's clearly no shortage of interest in Bellflower's path toward legalization. We were among the many cannabis lawyers, entrepreneurs, and business owners, in attendance, and we left the meeting with the new information you need about Bellflower.
Bellflower’s mayor made it clear that the city will only be issuing 12 permits for cannabis-related business activities. The mayor did not specify exactly how many of these permits will be allotted to each type of activity. However, it's clear that applications will be made available for dispensary, cultivation, distribution, and manufacturing. The application fee is a whopping, non-refundable $25,000. Furthermore, this fee will be levied annually in addition to standard business taxes. The application will open September 27, 2017, and applicants will be required to submit both a Conditional Use Permit Application and a Cannabis Business Permit Application.
Each application will be evaluated on its merits, and the strongest applications will receive licenses. The City made it clear that there is not an explicit criteria or point system to rate each application. However, in order to be considered for a license, companies must have at least $400,000 in liquid funds, as well as either ownership of the property they are operating out of or a long-term lease of at least 10 years. The City made it clear that businesses which have operated continuously are preferred, and that companies may not submit one application for multiple types of business activities. (For example, a company interested in both cultivation and distribution must apply for the two licenses separately.)
One additonal bright spot of the meeting was the city’s promise to grandfather in all compliant medicinal license holders once recreational sales licenses become available.
Check back with us for regular updates - this is a fast-moving time for cannabis licensing in Los Angeles County.