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Table Of Contents
California has long been at the forefront of the cannabis legalization movement in the United States. With a history dating back to the Compassionate Use Act (CUA) of 1996, the state has paved the way for both medical and recreational cannabis use. In this blog, we will delve into the licensing requirements for cannabis businesses in California, exploring the regulatory framework and recent legislative changes that are shaping the industry.
The Compassionate Use Act (CUA) of 1996
California made history in 1996 by becoming the first state to legalize medical marijuana with the passage of the Compassionate Use Act (CUA), also known as Proposition 215. Under the CUA, patients and their primary caregivers gained the legal right to obtain and use marijuana for medical purposes without fear of criminal prosecution. The CUA initially identified eleven specific medical conditions that qualified for medical cannabis use, but it also included a broader clause allowing its use for any condition that substantially limited a person's ability to conduct a “major life activity.”
Proposition 64 – Adult-Use Marijuana Act
In November 2016, Proposition 64, also known as the Adult-Use Marijuana Act, was approved, allowing adults aged 21 and older to cultivate and purchase marijuana for recreational use. Adults were also permitted to give away up to one ounce of cannabis to other adults. This marked a significant step towards a more relaxed cannabis policy in the state.
The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA)
The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), enacted in June 2017, consolidated the regulatory framework for both medical and adult-use cannabis in California. MAUCRSA established three agencies responsible for overseeing cannabis activities:
- Bureau of Cannabis Control: The lead regulatory agency responsible for authorizing licenses.
- California Department of Public Health – Manufactured Cannabis Safety Branch: Overseeing cannabis product manufacturing and safety.
- California Department of Food and Agriculture – CalCannabis Cultivation Licensing: Managing licenses related to cultivation.
The Licensing Requirements
The licensing system created by MAUCRSA is complex and includes a minimum of twenty license classifications. These classifications cover various aspects of the cannabis industry, such as adult-use, medical use, cultivation, manufacturing, retail, distribution, testing, and microbusinesses. It's important to note that once a license is granted, it is non-transferable.
Additionally, while there is no set cap on the number of licenses issued, the requirements to obtain one are rigorous. Applicants must meet various criteria, including being California residents, passing background checks, demonstrating a legal right to use the proposed location, obtaining a valid seller's permit, providing proof of a bond, and outlining detailed operating procedures.
Types of Cannabis Licenses
The Department of Cannabis Control (DCC) plays a crucial role in regulating and overseeing the cannabis industry, issuing licenses based on the specific type of cannabis-related activity that a business intends to undertake. It's essential to note that if a business plans to engage in multiple cannabis-related activities, it may require more than one license.
Obtaining a valid DCC license is a prerequisite for engaging in any commercial cannabis activity, and this includes a wide range of activities such as cultivation, distribution, manufacturing, testing, retail sales, and organizing events where cannabis will be sold.
To assist businesses in understanding the requirements and procedures for obtaining these licenses, the DCC provides valuable resources on the following topics:
- License Application Requirements: Detailed information on the prerequisites and criteria for submitting a license application.
- How to Apply for a License: Guidance on the process of submitting a license application to the DCC.
- License Application Review: Insights into how the DCC's licensing team reviews and evaluates applications.
- License Renewal: Information on the process for renewing a cannabis license to ensure continued compliance with regulations.
Cultivation licenses are categorized based on various factors, including the type of production and lighting used, as well as the number of plants grown or the size of the cultivation canopy (the area where mature, flowering plants are grown). These licenses encompass a range of options:
- Specialty Cottage: These licenses are suitable for small-scale cultivation and can be further divided into specialty cottage outdoor (for up to 25 mature plants or 2,500 square feet of canopy), specialty cottage indoor (up to 500 square feet of canopy), and specialty cottage mixed-light tier 1 and 2 (up to 2,500 square feet of canopy).
- Specialty: Specialty licenses cater to slightly larger operations and include specialty outdoor (up to 50 mature plants or 5,000 square feet of canopy), specialty indoor (ranging from 501 to 5,000 square feet of canopy), and specialty mixed-light tier 1 and 2 (ranging from 2,501 to 5,000 square feet of canopy).
- Small: Small cultivation licenses encompass small outdoor operations (ranging from 5,001 to 10,000 square feet of canopy), small indoor (ranging from 5,001 to 10,000 square feet of canopy), and small mixed-light tier 1 and 2 (also ranging from 5,001 to 10,000 square feet of canopy).
- Medium: Medium-scale cultivation licenses include medium outdoor (ranging from 10,001 square feet to 1 acre of canopy), medium indoor (ranging from 10,001 to 22,000 square feet of canopy), and medium mixed-light tier 1 and 2 (also ranging from 10,001 to 22,000 square feet of canopy).
- Large: For larger-scale operations, there are large outdoor licenses (for cultivation sites with more than 1 acre of total canopy), large indoor licenses (for sites with more than 22,000 square feet of total canopy), and large mixed-light licenses (for mixed-light sites with more than 22,000 square feet of total canopy).
- Nursery: Nursery licenses are specifically designed for cultivators specializing in the propagation of cannabis through clones, immature plants, seeds, or other propagation methods.
- Processor: Processor licenses are intended for businesses involved in post-harvest processes such as trimming, sifting, curing, drying, grading, packaging, or labeling of cannabis.
Determining the appropriate cultivation license type depends on factors like cultivation methods, canopy size, and lighting used. Outdoor, indoor, and mixed-light licenses cater to different cultivation environments, while specialty licenses are suitable for smaller operations.
Manufacturing License Types
Manufacturing licenses are based on various factors, including the specific activities performed, the chemicals used for extraction and post-processing, and whether the manufacturer operates in a shared-use facility. These license types include:
- Type 7: Volatile Solvent Manufacturing: Manufacturers with Type 7 licenses can use volatile solvents for cannabis extract extraction or post-extraction processing, as well as non-volatile solvents for extraction or post-processing. They can also employ mechanical methods for extraction, produce cannabis products through infusion, and handle packaging and labeling.
- Type 6: Non-Volatile Solvent Manufacturing or Mechanical Extraction: Type 6 manufacturers are permitted to use non-volatile solvents for extraction or post-extraction processing. They can also employ mechanical methods for extraction, produce cannabis products through infusion, and handle packaging and labeling.
- Type N: Infusion of Products: Manufacturers with Type N licenses specialize in creating cannabis products through infusion, mixing cannabis extract or plant material with other ingredients to produce a range of cannabis-infused products.
- Type P: Packaging and Labeling: Type P manufacturers focus solely on the packaging and labeling of cannabis products.
- Type S: Manufacturers in Shared-Use Facilities: Type S manufacturers operate within shared-use facilities, allowing multiple license holders to rotate and share space and equipment. They can extract cannabis using specific methods, produce cannabis products through infusion, and manage packaging and labeling.
Distribution licenses are primarily categorized into two types:
- Type 11: Distributor: Type 11 distributors have the authority to transport cannabis and cannabis products between cultivation, manufacturing, or distribution premises. They can also move finished cannabis goods to retail premises, provide storage services to other licensees, and arrange for testing of cannabis goods.
- Type 13: Transport-Only Distributor: Type 13 distributors focus on transporting cannabis and cannabis products between cultivation, manufacturing, or distribution premises. Reduced fees are available for businesses that exclusively transport the goods they cultivate or manufacture.
Testing Laboratory Licenses
Testing laboratory licenses are crucial for ensuring the safety and quality of cannabis products. The primary testing laboratory license is categorized as a Type 8 license, specifically for laboratories that test cannabis goods before they are made available for sale at retail locations. Testing laboratories must obtain and maintain ISO/IEC 17025 accreditation, with the option to use an interim testing license while working towards accreditation.
Retail licenses encompass two types:
- Type 9: Non-Storefront Retailer (Delivery Only): Non-storefront retailers exclusively sell cannabis goods through delivery services, catering to customers who prefer to purchase cannabis products remotely.
- Type 10: Storefront Retailer: Storefront retailers have physical locations where they sell cannabis goods directly to customers. Additionally, storefront retailers can provide delivery services to reach a broader clientele.
Micro Business Licenses
The Type 12 license is specifically designed for businesses that engage in at least three of the following activities at a single location: cultivation (up to 10,000 total square feet), manufacturing (utilizing non-volatile solvents, mechanical extraction, or infusion), distribution, and retail (both storefront and non-storefront).
Cannabis event licenses come in two categories:
- Event Organizer: Event organizers, holding an event organizer license, are responsible for hosting cannabis events.
- Temporary Cannabis Event: Temporary cannabis event licenses pertain to the actual events themselves.
These licenses enable the hosting of cannabis-related events, providing a legal framework for such gatherings.
In conclusion, the diverse range of cannabis licenses offered by the Department of Cannabis Control reflects the dynamic nature
MAUCRSA also grants municipalities the authority to further regulate or even prohibit commercial cannabis activities within their jurisdictions. This means that while cannabis is legal statewide, individual cities and counties can choose whether or not to allow cannabis businesses to operate within their boundaries.
Challenges and Recent Developments
Despite the significant growth in California's cannabis market, there have been challenges for licensees. Many operators are currently running under provisional licenses, which were not intended to be permanent. As of 2021, regulators would no longer renew these provisional licenses after December 31, 2021. To transition to annual licenses, businesses must comply with the California Environmental Quality Act, a costly and time-consuming process.
In response to these challenges, the California Legislature approved a $100 million bailout in 2021 to support cannabis companies in completing the required environmental studies to transition from provisional to annual licenses. Additionally, Assembly Bill 141 and Senate Bill 160, both passed in 2021, have extended the sunset schedule for provisional licenses, allowing businesses to incrementally comply with the standards of more permanent licenses.
California's cannabis market remains full of potential for growth. While the state has been a trailblazer in cannabis legalization, nearly half of its counties and municipalities still prohibit commercial cannabis activities, allowing the black market to persist. Recent legislation, such as Assembly Bill 195, which eliminated the weight-based cannabis cultivation tax and introduced tax credits for certain cannabis businesses, aims to address some of these issues.
Furthermore, bills like AB 2188, which seeks to prevent employment discrimination based on off-the-job cannabis use, could further expand the recreational cannabis consumer base if enacted.
California's cannabis licensing requirements and regulatory landscape are continually evolving. While the state has made significant strides in the legalization of both medical and adult-use cannabis, businesses must navigate a complex system of regulations and compliance. With the potential for further legislative changes on the horizon, the California cannabis market continues to be a dynamic and evolving industry.
Lydia K. (Bsc. RN) is a cannabis writer, which, considering where you’re reading this, makes perfect sense. Currently, she is a regular writer for Mace Media. In the past, she has written for MyBud, RX Leaf & Dine Magazine (Canada), CBDShopy (UK) and Cannavalate & Pharmadiol (Australia). She is best known for writing epic news articles and medical pieces. Occasionally, she deviates from news and science and creates humorous articles. And boy doesn't she love that! She equally enjoys ice cream, as should all right-thinking people.
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