Turmoil abounds over Los Angeles’ latest marijuana business licensing and its social equity program

Just Released! Get realistic market forecasts, state-by-state insights and benchmarks with the new 2024 MJBiz Factbook member program, now with quarterly updates. Make informed decisions.

, Turmoil abounds over Los Angeles’ latest marijuana business licensing and its social equity program

Los Angeles’ latest marijuana business licensing round – which opened last month and has yet to award any retail permits – has many hopeful applicants outraged and threatening to take drastic action if major changes aren’t made.

Hundreds reportedly appeared Thursday for the city’s Cannabis Regulation Commission meeting, where allegations of corruption, incompetence, and basic unfairness were leveled at city officials, including Cat Packer, the head of the L.A. Department of Cannabis Regulation (DCR). Packer defended the agency.

The California Minority Alliance in recent weeks has circulated evidence it says shows the licensing system was compromised. At least two applicants were able to enter the software application filing system before 10 a.m. on Sept. 3, when the licensing round began, the DCR confirmed Thursday.

The situation has fueled frustration over the licensing process. If left unchanged by the City Council, regulators will award only 100 MJ retail licenses to the first 100 applicants who last month filed their documents with the DCR, which received a total of 802 applications.

So far, a DCR spokeswoman confirmed Friday, the agency has invoiced approximately 40 of the top 100 applicants. Of those, 18 have paid fees and moved on to the next licensing step.

Any applicant that receives an invoice has 10 days to pay the fees. The DCR will be invoicing all qualified applicants within the next two weeks.

Moreover, specific components of the licensing program are drawing widespread criticism.

Social equity applicants, for example, are demanding the licensing process be started over. Alternatively, they want the number of licenses increased to ensure the social equity program serves the African American community.

“This whole process has been grossly abused,” one social equity applicant told the commission.

Another added: “There should definitely be more than 100 licenses allowed in the first round. It’s social equity, not corporate equity.”

Yet another urged the commission: “We should just scrap the whole thing and start over.”

Armenian applicants

Virgil Grant, a longtime L.A. marijuana businessman who was one of the earliest proponents of social equity, criticized the licensing process for allowing Armenian residents to get in front of local African American residents for the coveted 100 MJ retail permits.

“As long as I’ve lived here, I never met one Armenian” in Compton, where Grant has lived most of his life, he said. “How is it that a majority of the first 100 names are Armenian?”

Grant’s comments spoke to a suspicion held by many stakeholders that automated online bots were used by some applicants to file multiple applications quickly on Sept. 3, arguably breaking the rules and giving them an advantage over other social equity participants.

“If they don’t change it, it will be burnt down,” Donnie Anderson, a co-founder of the California Minority Alliance, told Marijuana Business Daily after the commission hearing.

“The people of South Los Angeles will not be victimized again. The revolution will be televised,” Anderson said. “I’m a nonviolent person, 100%. But when you leave people in desperate situations … desperate things happen.”

Officials say process worked

Packer, however, defended the licensing process during a report to the commission, adding that “the system itself operated as planned.”

Packer noted a DCR analysis showed two applicants were able to access the system before 10 a.m. Sept. 3 because of a loophole: The pair had asked to have their passwords reset.

But, Packer said, those two were pushed back in line for the licenses to reflect a start time of 10 a.m. Their resulting places in line for licenses put them at Nos. 59 and 182, respectively.

Packer said that within the first three minutes after the 10 a.m. start, a whopping 338 applications had already been submitted, and the average time it took for the first 100 submissions was 71 seconds.

During a test run, a DCR staffer was even able to upload all the required documents for an application in just 38 seconds, she said.

Packer began her statement to the commission by inviting any stakeholder to file an ethics claim with the city. Packer added that “no data or evidence … suggest that nonhuman systems were utilized” to file applications.

Packer did acknowledge, however, that applicants with slower internet connections may have been at a disadvantage, given how quickly the line moved on Sept. 3.

“The truth of the matter is that if an individual applicant had a slow connection speed … that is something that would not be accounted for in our system,” Packer said.

Concern from overseers

Packer also faced skeptical commission members alongside angry residents.

“They’re being set up to fail,” Commissioner Thryeris Mason said of many social equity applicants, referring to how it will still likely be months before any of the newest 100 licensees can open their stores.

Mason suggested the city change course to offer some type of temporary approval for retail licenses – a suggestion Packer agreed with – since, under the current plan, the 100 new shops must get full annual permits before being allowed to begin sales.

A DCR spokeswoman wrote in an email to MJBizDaily that Packer and her agency “take community concerns VERY seriously,” and pledged to “proactively seek… feedback from the community” for further policy recommendations to the city council.

Commission President Robert Ahn echoed Mason and said he’s heard from many social equity applicants that they’ve already been paying rent on store locations for months while waiting for the licensing process to play out, leaving many in dire financial straits.

“It’s like before they get out of the gate, it’s insurmountable odds already,” Ahn said. “What do we do about folks that are sitting on leases?”

No answers were to be had to such questions Thursday, however. That will be left to the City Council in coming weeks, and it’s anyone’s guess as to what the council will do about the situation.

John Schroyer can be reached at johns@mjbizdaily.com