Over 400 California marijuana business licenses suspended, injecting fresh uncertainty into state’s cannabis industry

(This story has been updated after the California Department of Public Health confirmed late on Nov. 7 it had suspended 13 manufacturing business licenses. That brings the total number of suspended permits to 407.)

California has suspended more than 400 marijuana business permits, temporarily paralyzing roughly 5% of the state’s legal cannabis supply chain ranging from retailers to distributors.

Those companies must cease all sales transactions until their licenses are reinstated to “active” status, leading one prominent trade group to criticize the state for temporarily reducing the number of legal shops.

The Bureau of Cannabis Control (BCC) on Nov. 1 issued notices to 394 retailers, delivery services, distributors and microbusinesses that they won’t be legally able to conduct business until they’ve undergone mandatory track-and-trace system training and credentialing, a spokesman for the agency confirmed.

As of Wednesday, the suspended licenses had dipped to 385 and included:

  • 63 retailers
  • 61 delivery services
  • 47 microbusinesses
  • 185 distributors
  • 29 distributors that are transport-only

The BCC currently oversees 2,630 marijuana companies that hold either provisional or annual licenses, while the California Department of Public Health (CDPH) oversees an additional 932 manufacturers, and the state Department of Food and Agriculture (CDFA) oversees 3,830 MJ farmers.

All told, California has a total of 7,392 licensed cannabis businesses.

Failure to complete track-and-trace steps

The problem, said BCC spokesman Alex Traverso, is that all the 394 affected businesses have had ample time to complete the required track-and-trace steps and to begin uploading their inventory data so state regulators can keep tabs on the cannabis supply chain via Florida-based Metrc’s software.

The Metrc requirement is part of receiving a provisional license, a transitional process from a temporary license to a permanent annual permit. All temporary licenses expired over the summer.

Any business that was given a provisional business permit was also given five days to sign up for Metrc, take required training and begin using the system.

But the 394 companies hadn’t done so.

“So, finally, about a week ago, we sent out another note, saying, ‘By this past Friday (Nov. 1), you guys need to be in Metrc, signed up, or officially your license is going to be suspended,'” Traverso said. “The gist of it is, now if they go out and they get their credential, the suspension is lifted.”

By comparison, Traverso noted, another 2,236 licensed businesses completed the Metrc credentialing process and are uploading their inventory data.

“These were just the stragglers,” he said. “It turned out to be a couple extra months that we gave them. It’s just a matter of getting a password, getting a login and doing the training.”

Traverso estimated it takes three hours to complete the requirements to get a suspension lifted and he doubts any companies will refuse to comply.

Firms take steps to comply

The CDFA also did not list any suspended licenses, but spokeswoman Rebecca Foree wrote in an email to Marijuana Business Daily that the CDFA sent notices to 103 cannabis farmers on Oct. 22 that their permits would be suspended if they didn’t complete the required track-and-trace participation.

“All but three of the licensees CDFA contacted have responded and are working on becoming credentialed into the system,” Foree wrote.

A CDPH spokesperson wrote in an email to MJBizDaily late Thursday that it had “suspended 13 cannabis manufacturing licenses this week for noncompliance with (Metrc) credentialing requirements” and that 909 of its 932 licensees were already properly credentialed for the track-and-trace system.

“The licenses that were suspended were issued more than 30 days ago, and the licensees received numerous written notices and phone calls from staff instructing them to comply,” according to the email.

.As of Wednesday morning, the number of suspended licenses had already dropped to 385, according to BCC licensing data.

“People have already done it. We’ve already seen people do that and get their suspensions lifted,” Traverso said on Tuesday. “I think there were about 80, since Friday afternoon, that had already gone in and got their credential.”

He added that the change in license status – from suspended to active – may not be immediately reflected in the BCC’s online data.

Boon to the illicit market?

However, some industry insiders expressed alarm at the move and suggested the step could only be another advantage for the illicit market, especially if retailers in particular are forced to halt operations, even temporarily.

“It’s very concerning,” said Josh Drayton, communications director for the California Cannabis Industry Association.

He pointed specifically to the fact that licenses were suspended for 63 retailers and 61 delivery services. That equates to about 10% of the legal MJ shops and 20% of legal delivery businesses.

“There’s a huge pause right now. And in a time when we’re trying to incentivize consumers to buy regulated, tested product … it’s minimizing their options,” Drayton said. “We’re kind of incentivizing the illicit market, which is a much more affordable option right now (for consumers). What we really need to be focused on is access and affordability.”

Drayton also criticized the BCC and said state regulators haven’t been as communicative to industry stakeholders as they need to be.

“This has flown under the radar” in much of the industry, Drayton said. “It comes back to communication.

“Metrc has been a looming issue that folks may not have received the messaging, that this has to happen immediately, that you need to get on-ramped into Metrc.”

But Traverso defended the move and said the requirement has been quite clear from the get-go.

“They need to be nudged in this direction. This is part of the reality,” he said.

“It’s part of the deal as it relates to being legal: You have to use Metrc.”

Business as usual

Sacramento-based consultant Jackie McGowan said she doesn’t believe the suspensions will have that big of an impact on the legal supply chain, in part because there’s apparently a technical glitch within the Metrc program that allows companies with suspended licenses to continue doing business.

“I don’t see this being any disruption to the supply chain, unless any of those operators decide to shut down for some reason,” McGowan said.

The glitch even came to the attention of Yolo County officials, who issued a notice to all their licensed MJ farmers to check on the license status of any distributor or other business type before selling them any cannabis.

“Metrc is currently allowing transfers to occur (using the licensed transfer page) with those businesses that have suspended licenses,” an official with the Yolo County Cannabis Program wrote to farmers in an email obtained by MJBizDaily.

“I have brought this to the state’s attention but do not know when a resolution to the issue will be performed.”

A spokesperson for Metrc referred MJBizDaily to the CDFA.

Foree, the CDFA spokeswoman, wrote in an email that the agency “does not comment on its investigations.”

John Schroyer can be reached at [email protected]

20 comments on “Over 400 California marijuana business licenses suspended, injecting fresh uncertainty into state’s cannabis industry
  1. Shuki Greer on

    This kind of enforcement is necessary and concerning at the same time. On the one hand, there has to be some accountability. People can’t be allowed to just not comply and get away with it. At the same time, suspending a license is just going to push many businesses into the black market, where they don’t have to worry about licensing fees, 280E problems, or compliance costs. So we need to come up with a better punishment that truly incentivizes following the rules.

    Reply
  2. Barry on

    This is the organized crime approach to business.

    The opioid epidemic is over. The rate of unnecessary deaths dropped by 3% and the companies paid a fine. The rest of the bulk of punishment will remain in the cannabis industry that has killed no person.

    Reply
    • Tom on

      Killed no person??? The recent Vape epidemic killed over 30 people and many of them were cannabis users

      The commercial cannabis market has cost a few lives ( vitamin E acetate tainted vape pens)

      The demand is outweighing the supply and it is leading to a boon in the black market were unregulated product is hitting the street and costing lives. The fake or counterfeit vape market is huge!!!!

      Reply
      • david on

        Tom, How is it that you believe that the Black Market is costing lives?
        Prior to prop 64 in California, there were no recorded deaths related to cannabis toxicity. Now that the state’s are in control we have people dying. Can anyone guess how many body bags will be needed when the Feds legalize cannabis?
        The government needs to leave our healthy garden flowers alone.

        Reply
  3. N on

    Love hearing legal market bitching about Black and Gray market , it’s like the Millennium Golden Child living home bitching about his parents who’s hard work allowed this opportunity to flurish! Black and Gray is alive and prosperous, as usual!!! Live and let live! Respect your parents!

    Reply
    • Juan cervantes on

      Juan November 14-2019 8;37

      commercial Cannabis is making history as a good job build industry, the social responsibility to provide good weed to people whom support the industry. the other industry’s went through growing pains , we can play the Blame game! whisky had wood alcohol killed many people . yes it was just a few bad operators. cannabis is your Baby and its up to you to take care of it. come off cloud 9 and take responsibility !! if bad product is recalled lets trace it. just like e-coli in lettuce . or like bad or tainted meat recall. the cannabis industry did not kill anyone, lets fix the vaping issue! you do not want the cannabis state enforcement Goons to do it for you?

      Reply
  4. Brandon A on

    Much ado about nothing. That last 5% of the industry needs to put down the dab and check their emails for a few minutes. Sometimes you’ve got some hoops to jump through for the gov’t when you’re in business. No industry is exempt from that.

    Reply
  5. TrueBliu Nineleven on

    This is why many are against establishment as it pertains to cannabis.

    It is an absolute travesty. This level of required “training” to sell cannabis, in addition to this level of enforcement of the “rules,” is not necessary. At all.

    It doesn’t matter if it’s three hours or three years of training. The training is only required to teach people how to give the government information regarding their private businesses.

    It doesn’t take a genius to sell cannabis to a buyer.

    Is a grocery store required to submit information to a government database on the number of tomatoes it has in inventory?

    Just stop.

    Reply
    • reality bytez on

      the proper analogy would be liquor, not tomatoes. and yes, there are very strict rules on tracking the inventory and sales of liquor.

      Reply
      • Pat on

        Yeah. But straight up liquor can kill you in one sitting. Straight up weed can’t. Just reminds me of how much my gov. cares about my safety and the publics’ health.. Which is where the gov priorities must be. However, that’s not the case here. MCMRSA is a failure. In every which way.

        Question: Did WE have this much “death/destruction” with the personal consumption of plain weed before it became “legalized?” That, outside of cartel members killing each other off over turf battles ( still going on, even with this b.s. legal framework… ).

        Reply
        • George on

          To Pat’s Question: Did WE have this much “death/destruction” with the personal consumption of plain weed before it became “legalized?”

          NO!

          Reply
  6. Noob on

    The only way to have a black market at all, is when law enforcement proves to be dirty and/or opium addicted. Did you think only “civilians” got addicted? Who gets banged up more, Joe lawn mower or DIp Danger, super cop. Do the math…

    Reply
  7. Seesa on

    Regarding that Vaping issue with people dying, that Tom wrote…

    Their will be someone in the Mexican Cartell that will watch “Breaking Bad”, and figure out, there is a market for quality, and the bad vaping products will change…. as The cartell will punish those that tamper with their product…

    When I saw the news of 4 found dead in the garage of a home… 2 blocks away from where I lived, shot gangland style, I got the hell out the neighborhood. I know they are out there policing their own.
    There will always be somebody that knows somebody… that knows somebody, that will get the good product…

    their will always be someone who will step on product. that has been going on for decades… and if caught stepping on product, they better watch out.
    From someone that has seen it happen, and experience/life is the best teacher… because noone will believe you until you experience it.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *