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Why California’s Cannabis Industry Struggled in 2018

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California’s cannabis businesses have had to put up with a lot of confusion this year. Due to the state’s cumbersome laws and regulations, cannabis business owners interested in obtaining a license have had to go through a pretty difficult system. This has been a rather unfortunate side effect of legal and nonlegal issues that the state has been facing recently, and there’s little reason to believe that things will be changing any time soon.

Licensing hasn’t gone as smoothly as many business owners would have wanted. After enacting the Medicinal and Adult Use Cannabis Regulatory and Safety Act (more succinctly referred to as MAUCRSA), California opened up adult use licensing at the beginning of 2018. But here’s the problem: one of the provisions in MAUCRSA requires local approval for any company that wants to apply for a temporary license or an annual one.

Because of this, applicants seeking a license have to apply for the state license and the local license separately. Only after being approved locally can they register for a license at the state level, and that’s no easy task since localities have varied widely in their application processes. It can take many months to find land for a business, get local approval, and then, finally, apply for a state license. And then applicants just have to go through another approval.

This isn’t the fault of one entity. It’s something of an unfortunate perfect storm resulting from legal and business entities working for their own interest. Then again, it isn’t like managing licensing procedures for large cities (like Los Angeles), that is a simple task. That’s why L.A. uses a phased system that only allows applicants to apply at certain times. Maybe this keeps the municipalities  from being flooded with too many applications at once, but it also keeps people waiting. For a while. The delays have stretched out across all of 2018, and the “third phase” won’t even begin until mid to late 2019.

So, temporary licenses are probably a good idea—right? Sort of. The way MAUCRSA is set up, it allows temporary licenses to be issued to some applicants. They last for 120 days and can be renewed for 90 days. The idea is that a temporary license will keep people working on their businesses if they have already been cleared locally. In other words, you get to work while you wait (for annual approval). But for some reason, these are only allowed to be issued in 2018.

It works out pretty well for applicants who already received local approval,  they had what they needed by the 2018 cut-off date and can use their temporary license just fine. The problem is that the active licensing applications were so backlogged that some localities weren’t able to run all of their phases in 2018. To compensate for this, they sent out approval letters later in the year, but the high volume of applications lead to a pretty tough bottleneck in the final months.

Many of these delays couldn’t have been anticipated. Environmental disasters and other problems arose, putting the already cumbersome process through even more trouble. But the California legislature has noticed the delays and has created a “provisional license” that will be awarded through 2020. It’s a lot like the temporary license, but it lasts longer. This could have been just what backlogged applicants needed, giving them another shot at getting a license even though they missed the cutoff for 2018. But one extra provision makes it just about useless for them: only applicants already approved for a temporary license in 2018 can use it. So, it isn’t doing much for those who need it most.

If the licensing trouble wasn’t enough, California’s regulations have undergone a host of changes in 2018 too. Some of the changes appear to be in the process of being drawn back while others seem a bit more lasting. Regardless, this is yet another source of distress for applicants interested in getting a license and joining the cannabis business.

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