L.A. Council president requests redo of retail marijuana licensing round, sending shockwaves through market

City Council President Herb Wesson believes the latest marijuana business licensing round in Los Angeles should be redone.

More confusion was added to the mix in Los Angeles this week over the city’s latest marijuana business licensing round after City Council President Herb Wesson called for the process to be redone, thus throwing into doubt the fate of 100 highly coveted cannabis retail licenses in the largest MJ market in the world.

Some winning applicants, in response, threatened to sue the city if the initial results are scrapped.

But industry officials applauded the move, saying last month’s licensing round had been flawed.

In a letter to the L.A. Department of Cannabis Regulation (DCR), Wesson recommended that:

  • The roughly 800 retail marijuana license applications submitted last month be suspended.
  • License applicants be given a refund for their fees.
  • All invoices sent to winning applicants be canceled.
  • A third-party audit be performed to ensure the licensing system has been working properly.

“It is paramount that the application process have the utmost integrity, be transparent, and fair,” Wesson wrote. “There appears to be no scenario in which the Retail Round 1 process can meet those three principles currently.”

Wesson cited an admission by DCR Director Cat Packer last week that two applicants were able to get into the application system before 10 a.m., the designated start time for filing applications. As a result, Wesson said, the entire process was “compromised.”

In an emailed statement to Marijuana Business Daily, a DCR spokeswoman said the agency is “committed to the most fair and transparent process possible. We’ll be meeting with the Council President’s Office soon to discuss their recommendations.”

Packer said last week that the two applicants that gained early entrance were detected by her staff and the candidates’ places in line for applications were adjusted accordingly to a start time of 10 a.m.

What’s next?

As of Wednesday, it was unclear what would happen next – especially whether the DCR would heed Wesson’s advice and redo its own licensing, which it has the authority to do without a vote of the full Council, or move ahead as planned.

“Technically, all (Wesson has) done is put a halt to things and he’s asking for a third party to come in and prove that it was on the up and up. That’s all that’s been done right now,” said Adam Spiker, the executive director of the Southern California Coalition (SCC), a group of cannabis industry stakeholders.

Spiker said Wesson was between a rock and a hard place, in part because he:

  • Spearheaded the entire social equity program push within the City Council.
  • Represents many of the communities that are incensed over how the program has played out.

“He had to do it,” Spiker said of Wesson’s letter. “I just think there are too many folks out there, from the communities that have been impacted statistically by the war on drugs that do not believe the process was on the up and up. So he had to do something.”

Lawsuits threatened

But the news sent shockwaves through the California marijuana business community, and several winning applicants promised they would sue the city if their positions in the top 100 of the first-come, first-served process were thrown out.

“We got an invoice TODAY,” one applicant wrote on Facebook. “Fully intend to sue the city if we lose our building because of this.”

Another winning applicant, who requested anonymity, wrote in an email to MJBizDaily, “Now they want to delay it or overturn it. I would be bankrupt or would have to sell shares, which I do not want to do. … If this is delayed or overturned, I will be suing for sure.”

Leona Whitney Beatty, an African-American single mother who won slot No. 45 last month and was primed to move forward with her cannabis shop, said Wesson’s proposal is “adding insult to injury.”

“We did exactly what the city told us to do,” Beatty said. “And for them to now go back and try to undo this process, I couldn’t sleep last night, worried about what happens now.

“It’s literally playing games with people’s money and livelihoods.”

Beatty said she’s already received an invoice from the DCR for the latest licensing round and was hoping to open her new L.A. shop in the first quarter of 2020. But now she’s uncertain exactly what will happen.

Some stakeholders support a redo

The California Minority Alliance (CMA) and some of the other applicants, however, applauded Wesson’s move because they believe there were too many flaws with the September process.

“We are grateful and the people are grateful. It’s just about fairness,” said Donnie Anderson, co-founder of the CMA, which issued a letter of its own supporting Wesson’s proposal.

“He’s seen that the system is compromised … and if the system is compromised, you have to change it,” he said.

Anderson, who believes the licensing system was indeed compromised, said he wants the entire process redone, along with a third-party audit to iron out any kinks.

Spiker said he believes the licensing process will likely be addressed by the City Council in November and that one potential solution might be an increase in the number of available licenses. Only 100 retail permits are up for grabs in the first round of Phase 3 and another 150 in the second round, which has yet to open.

“There should be a real, hard conversation about expanding the number of licenses,” Spiker said, noting the estimated hundreds of illegal shops that still operate in L.A., largely due to simple market demand for cannabis that can’t be filled by the existing 187 legal retailers.

John Schroyer can be reached at [email protected]

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