California Regulators Suspend Nearly 400 Cannabis Business Licenses

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PHOTO: Karin Hildebrand Leau / Shutterstock.com

SACRAMENTO – The California Bureau of Cannabis Control (CBCC) this week moved to suspend the licenses of 394 cannabis businesses, citing that they had not complied with requirements for track-and-trace systems, which allow regulators to monitor the state’s supply chain.

Businesses suspended included distributors, retailers, and delivery services. A spokesperson for CBCC called the suspended businesses “stragglers,” who had missed the extended deadline for training and uploading data to the monitoring system and still needed to complete the process.

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The suspensions are expected to affect five percent of California’s legal cannabis supply chain, according to reports. Cannabis industry advocates warned that the move would only encourage black market cannabis businesses to encroach further, while suspended shops become compliant.

“We’re kind of incentivizing the illicit market, which is a much more affordable option right now for consumers,” Josh Drayton, spokesperson for the California Cannabis Industry Association (CCIA) told local Los Angeles news channel KTLA. “What we really need to be focused on is access and affordability.”

The CBCC’s action comes after two recent requests from California officials to place limits on regulations and licensing for cannabis businesses.

Los Angeles City Council President Herb Wesson on November 1 requested that CBCC head Kat Packer suspend the request process for specialized marijuana retail licenses. According to Wesson, some irregularities allowed applicants filing under the state’s social equity program to access the online application portal prior to the start of the application period, which was on September 3.

A meeting last week of the Los Angeles Cannabis Regulation Commission saw many social equity program license applicants protest the licensing process and say that some applicants had received preference.

Wesson also called for a third-party audit of the application process, and said in a statement, “While it was always understood that not every applicant would get a license, it is paramount that the application process have the utmost integrity, be transparent and fair.”

Then, in Sacramento on Tuesday, the city council will meet to decide if a moratorium should be placed on ownership changes for cannabis dispensaries, as well as a limit on the number of dispensary storefronts that can be owned by one individual.

The developments come after local newspaper The Sacramento Bee printed an investigative report on “lax oversight” of the city’s lucrative cannabis industry.

Sacramento Mayor Darrell Steinberg is requesting that the city also hire a compliance officer to oversee city cannabis regulators.

The action comes after it was revealed that two permit holders managed to accumulate nine of the city’s thirty retail licenses with business partners, over the course of eight years, though transfers or sales of licenses is prohibited.

The Sacramento Bee also reported that one of the nine licenses in question was co-owned by a Ukrainian-born citizen, who has since been indicted in an alleged illegal campaign finance scheme involving former New York Governor Rudy Giuliani with possible ties to President Trump.

Social equity advocates pointed out that none of the thirty licenses that were awarded in Sacramento have been granted to African-Americans. Mayor Steinberg reiterated the need for a compliance officer to work with city auditors, for oversight of the city’s cannabis department.

He also proposed that five more licenses be granted to social equity program applicants, which would increase the number of retail storefronts in Sacramento to thirty-five.

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