Los Angeles paves way for regulated marijuana market on ‘historic day’

Los Angeles could be among a handful of California cities to begin recreational marijuana sales on New Year’s Day after the City Council’s unanimous approval of cannabis industry regulations Wednesday.

“Let’s don’t be a part of history. Let’s make history,” Council President Herb Wesson said moments before 12 council members voted to pass three ordinances to fully regulate both the adult-use and medical cannabis sectors in the nation’s second-largest city.

Among other things, the regulations include:

  • A social equity program that will require the city to license likely hundreds of applicants that were adversely affected by the war on drugs.
  • License caps that will limit exactly how many MJ business permits are ultimately issued.
  • Specific guidelines for businesses looking to obtain both L.A. and state licenses, including retailers, growers, edibles makers, MJ delivery operations and testing labs.
  • Provisional licensing for nonretail marijuana businesses.
  • Priority licensing for longstanding medical marijuana retailers that were already compliant with city law.

The ordinances and related documents can be viewed here, here and here.

The Los Angeles Cannabis Task Force celebrated the vote, calling the development a “watershed moment.”

“A regulated commercial cannabis market in Los Angeles is an accomplishment over a decade in the making,” the Task Force declared in a news release. “Now, for the first time, there exists a legal, sanctioned pathway for cannabis business licenses in the second-largest city in the United States.”

‘Work to do’

However, a myriad of questions must still be answered and further changes to the law are in store, said Adam Spiker, the executive director of the Southern California Coalition.

“The takeaway is, historic day, but lots of work still to do,” he said.

First and foremost, Spiker said, it’s incumbent upon city officials to now fast-track priority licensing for the few medical marijuana dispensaries in the city that could be eligible to begin rec sales Jan. 1.

But, he emphasized, it’s unclear whether the city will be able to move fast enough to meet that deadline.

Among his other concerns: As written, the regulations make it a near-certainty there won’t be room for hundreds of existing marijuana businesses that currently operate in the quasi-legal medical cannabis trade.

Specifically, he pointed to thousands of growers in the city that are still unlicensed.

“I’m not sure what to tell the supply-chain operators that have been in this industry forever,” Spiker said.

“There’s still a lot of angst and uncertainty for those folks that not only supply the (retailers that qualify for priority licensing) but also licensed operators up and down the state.”

Social equity provision limiting?

According to Spiker, it’s highly unlikely that all existing businesses in L.A. will be able to get licenses, especially given the constraints of the social equity provision.

The city originally had proposed a mandatory one-for-one license guarantee for those who qualify for the social equity program but now has moved to a two-to-one provision, according to the Los Angeles Times.

Spiker said there will be license caps under the regulations, but he’s not clear exactly how L.A. will determine the precise number of permits.

One city council document, for instance, appears to suggest only 390 retail licenses will be issued for the entire city.

If those limits stand, Spiker worries that the licensed market won’t be able to match market demand and that the city’s regulations will inadvertently give further life to the black market – especially since many suburbs in the metro area are choosing to ban MJ businesses outright.

That means there will be a constant influx of customers to L.A. from surrounding municipalities, he suggested. Not to mention tourists.

“If the city does not meet demand – both medical and recreational – it is just giving fuel to the illicit market,” Spiker said.

Alterations expected

Significant changes likely will be made to the regulations in coming months, particularly the social equity program.

Council member Bob Blumenfield, for example, said Wednesday he plans to introduce multiple amendments for the regulations.

He also suggested the rules don’t offer much in the way of zoned properties where MJ companies can legally operate.

Blumenfield said he knows of at least one longtime MMJ dispensary that qualifies for priority licensing but could be forced to relocate under the regulations passed Wednesday – unless its location is grandfathered in.

“I see some major flaws with what we have before us,” Blumenfield said. “If we restrict (the industry) too much … we’re not going to have enough space to actually have the industry function.”

Council member Nury Martinez also voiced concerns about possible over-concentrations of cannabis businesses – especially retailers – in certain parts of the city.

She suggested the council may need to further strengthen how many such companies are allowed in L.A.

“We need to ensure that our communities … are not negatively impacted by this industry,” Martinez said.

The L.A. Cannabis Task Force agreed with Spiker that the regulatory work is not finished.

“There is still much we don’t know about how this process will be administered, when actual applications will become available, or the first day the city will begin accepting submissions,” the Task Force said in its statement.

Other unknowns include:

  • When licenses will actually be issued.
  • How many total permits will be granted.
  • Specifics on how the social equity program will function.
  • Whether the city will be able to commence rec sales Jan. 1.
  • If the city will establish cannabis clubs or other locations for visitors to consume MJ legally.

Despite all the uncertainty, Los Angeles is on its way toward embracing a legal and regulated MJ market, Wesson emphasized at the council meeting.

“Today is our moment to set the tone …. for the rest of this country,” he said.

John Schroyer can be reached at [email protected]

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