Most Cali Cannabis Business Licenses Still ‘Provisional’

Since California began issuing cannabis licenses and taxes, many businesses have been operating under provisional licenses. These are temporary permits that allow businesses to continue operating until they receive their annual license.

Cynthia Curiel, left, and Emily Geiger sort products in the consultation area of the new Solful cannabis dispensary in Santa Rosa on Thursday, April 14, 2022. A provisional permit got the new dispensary open as it awaits its annual license.  (Christopher Chung/ The Press Democrat)
Image from North Bay Business Journal

However, due to the overwhelming amount of paperwork required, the California Department of Cannabis Control is struggling to keep up. This year alone, the department received a surge in applications between February and March, with 1,210 applications in March compared to 338 in the prior month.

With so many businesses still operating under provisional licenses, it’s difficult to know how many have actually been able to obtain their annual license. However, the state does acknowledge that the process is taking much longer than initially anticipated.

North Bay Business Journal reported that in order to help alleviate the backlog, the department is working on streamlining the application process and making it more user-friendly.

Hopefully, with these changes in place, more businesses will be able to obtain their annual licenses in a timely manner.

“We see a large licensing pool, more than what we anticipated,” department Director Nicole Elliott said.

As the cannabis industry continues to grow, so does the number of licenses being issued. The majority of the 3,951 permanent licenses issued are for cultivation businesses. This could mean that growers who were unhappy with the state because they believe they’re being overtaxed are now seeking legal status.

Small growers have until June 30 to turn in their applications to the state. These operations are defined as those that grow in less than 22,000 square feet in mixed-light indoor environments and 20,000 square feet in outdoor spaces. Licenses are to be issued by Sept. 30.

When Proposition 64 was passed in 2016, it resulted in the state establishing a system to manage the cannabis industry. This included requiring applicants to submit a license application. If more compliance issues arise or more review is needed, then the state issues a provisional license until an annual one can be granted.

Solful CEO Eli Melrod understands this process in-depth, as he operated his flagship dispensary on a provisional license for a several years before converting to an annual license in

“It allowed us to get operating and open while going through the building process,” he said, explaining further that his Santa Rosa location took longer than he thought it would. He applied for it in October and received his provisional in April. But he believes it’s even more of a challenge for growers.

As California begins to regulate its cannabis industry, it’s faced with a dilemma: how to balance the need for compliance with the desire for expediency?

On one hand, the state wants to make sure that all businesses in the industry meet the standards of the California Department of Fish and Wildlife and the California Environmental Quality Act. This includes making sure that their applications are complete and that they satisfy local laws.

On the other hand, some businesses are complaining that the process takes too long to get either a provisional or annual license.

Part of the issue is that the state is still in the process of hiring staffers to help with the processing of applications. “It’s tough. I think they’re severely understaffed,” said Lauren Mendelsohn, an attorney specializing in cannabis law.

Mendelsohn still sees a split between those who want to operate legally and those who don’t. “The cultivation folks run the gamut. Some are very committed to do (the business) the right way. But certainly, we’ve heard stories that the illicit market is still alive and well,” she explained.

It remains to be seen how California will strike the balance between compliance and expediency as it continues to regulate its cannabis industry. In the meantime, businesses will have to continue to jump through hoops to get their licenses.

Author:
Louis Levey is the Content Success Manager and Founder at No Strings Content. He's passionate about helping cannabis businesses use content to attract, educate, and convert audiences. His hometown is Boca Raton, Florida, but he currently lives and works remotely in Chiang Mai, Thailand.

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