California’s troubled cannabis industry faced yet another hurdle last month when the Bureau of Cannabis Control (BCC), the California Department of Food and Agriculture (CDFA), and the California Department of Public Health (CDPH) suspended over 400 business licenses across the state. The affected business were primarily distributors, but also included retailers, delivery services, microbusinesses, manufacturers, and cultivators.
California regulators have issued a total of 7,214 state licenses to cannabis companies, so only around 4% of the state’s businesses were affected.
Most industry observers agreed that the suspensions wouldn’t significantly disrupt the state’s cannabis supply. But the suspensions did reinforce growing perceptions that California’s regulatory system is overly burdensome, which pushes many entrepreneurs to throw in the towel–or to try their luck in the black market.
Complying with local and state regulations is no easy task, and may require the assistance of an experienced cannabis business lawyer. If you are running a California marijuana business, call McElfresh Law today at (858) 756-7107 or our online contact form to schedule your consultation today.
Why Most Licenses Were Suspended
A cannabis company cannot legally operate while their license is suspended. But many of the suspended licenses belonged to businesses that were either closed or preparing to open in coming months–so the effect on statewide business was minimal. By the end of November, the State lifted the suspension on hundreds of licenses after their owners finalized their registration on Metrc, an online system that allows the state to track and trace all of the cannabis grown, distributed, and sold in California.
According to the BCC, the vast majority of the remaining 277 licenses that were still suspended in late November belonged to non-operational business. The BCC suspects that only a handful of operational businesses have yet to register on Metrc.
Unlike many aspects of coming into compliance with state regulations, registering on California’s track and trace system is not particularly burdensome. The process involves registering a username and password, and then completing a three-hour online training program. So any business that has a Metrc-related suspension should be able to quickly overcome the issue.
This all begs the question of why so many non-operational businesses have licenses in the first place.
Some businesses may have run out of capital or faced other legal issues after obtaining their license, and never opened their doors. Alternatively, some small businesses like retailers and farmers may have obtained additional licenses to operate as distributors. But they gave up their hopes of vertical integration once they realized how difficult it is to operate as a distributor, and decided to focus on their core business. This could explain why a disproportionate amount of the suspended licenses were for distributors.
Compliance Issues With Local Regulations
Another reason why some cannabis businesses have not followed through with their registration is issues with local regulations. Any cannabis business that wants to operate legally in California must comply with both state and local regulations. Many businesses have successfully obtained their state licenses only to run into issues at the local level. These issues can include applying for zoning permits, ensuring handicap access to the premises, complying with county and city environmental regulations, bringing the premises into compliance with the fire code, and more.
Keep Your Cannabis License. Contact McElfresh Law
Many entrepreneurs are surprised to learn that bringing your business into compliance can cost hundreds of thousands of dollars. But it’s possible to anticipate these issues and reduce your costs with the assistance of cannabis business lawyer with experience working in your city or county.
If you want to open a cannabis business in the San Diego area, McElfresh Law can provide you with accurate and relevant information. And we can represent your interests through the administrative processes necessary to obtain permission to operate locally.