California will begin issuing licenses for “commercial cannabis activity” in 2018.
Last year the state legislature passed breakthrough legislation consisting of three bills: AB 243, AB 266, and SB 643. Collectively known by many as “the act” these three bills provide a comprehensive regulatory framework for licensing commercial cannabis in California.
- Where do I apply for a license?
- What license types were created?
- When can I get a license?
- What will the fees for the licenses be?
- Will there be limits on the number of licenses issued?
- What’s up with vertical integration?
- So, can I vertically integrate?
The following agencies will issue licenses:
- Department of Food and Agriculture: Cultivation. Learn more here.
- Department of Public Health: Manufacturing. Learn more here.
- Department of Consumer Affairs: Distribution, Testing and Retail. Learn more here.
Applications may be available as early as October. Licenses will not be available before January 1, 2018.
- Type 1 = Cultivation; Specialty outdoor;
- Type 1A = Cultivation; Specialty indoor;
- Type 1B = Cultivation; Specialty mixed-light;
- Type 1C = Cultivation; Specialty cottage; (AB 2516, 2016)
- Type 2 = Cultivation; Outdoor; Small.
- Type 2A = Cultivation; Indoor; Small.
- Type 2B = Cultivation; Mixed-light; Small.
- Type 3 = Cultivation; Outdoor; Medium.
- Type 3A = Cultivation; Indoor; Medium.
- Type 3B = Cultivation; Mixed-light; Medium.
- Type 4 = Cultivation; Nursery.
- Type 5 = Cultivation; Unlimited; (Prop. 64, 2016. Not available until 2023)
- Type 6 = Manufacturer 1.
- Type 7 = Manufacturer 2.
- Type 10A = Dispensary; No more than three retail sites.
- Type 8 = Testing.
- Type 11 = Distribution.
- Type 10 = Dispensary; General.
- Type 12 = Transporter. (Note: Prop 64 does not include this license)
- Type 13 = Micro-business
Licenses will not be available until 2018. You can begin preparing for licensure now by ensuring you are in compliance with all existing regulations.
Fees will be determined between now and 2018. All license fees shall be set on a scaled basis by the licensing authority, dependent on the size of the business.
The legislation requires the regulatory agencies to limit the number of Type 3 (Medium Cultivation) and Type 7 (Manufacturer 2 – Volatile Solvents). The legislation does not specify whether there will be limits on the the number of licenses issued for other license types.
Regulations limiting or authorizing vertical integration are an important feature of any regulated cannabis marketplace. In California, the Blue Ribbon Commission “and many of the individuals it consulted had significant reservations about the other end of the continuum, namely a market dominated by large corporations that could exert increasing influence on the commercial and political process.”
The Commission determined that “it is appropriate and probably wise for the state of California to adopt a path that limits the size and power—both economic and political—of any one entity in the marijuana industry.” Further, the report went on to say that “In addition to limiting the scale of operations, it may be appropriate for the state to set limits on vertical integration.”
Yes. But with limits.
The legislature took a decidedly cautious approach on vertical integration.
A licensee may only hold a state license in up to two separate license categories, as follows:
Type 1, 1A, 1B, 2, 2A, or 2B licensees may also hold either a Type 6 or 7 state license.
Type 6 or 7 licensees, or a combination thereof, may also hold either a Type 1, 1A, 1B, 2, 2A, or 2B state license.
Type 6 or 7 licensees, or a combination thereof, may also hold a Type 10A state license.
Type 10A licensees may also hold either a Type 6 or 7 state license, or a combination thereof.
Type 1, 1A, 1B, 2, 2A, or 2B licensees, or a combination thereof, may also hold a Type 10A state license.
Type 10A licensees may apply for Type 1, 1A, 1B, 2, 2A, or 2B state license, or a combination thereof.
Type 11 licensees shall apply for a Type 12 state license, but shall not apply for any other type of state licenses
A Type 10A licensee may apply for a Type 6 or 7 state license and hold a 1, 1A, 1B, 2, 2A, 2B, 3, 3A, 3B, 4 or combination thereof if, under the 1, 1A, 1B, 2, 2A, 2B, 3, 3A, 3B, 4 or combination of licenses thereof, no more than four acres of total canopy size of cultivation by the licensee is occurring throughout the state during the period that the respective licenses are valid. All cultivation pursuant to this section shall comply with local ordinances. This paragraph shall become inoperative on January 1, 2026.
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