Since passage of Proposition 64 in California last November, our California cannabis lawyers have been getting calls nearly non-stop about what it takes to secure a license to operate a marijuana business in the City of Los Angeles. Some are asking us about buying a Proposition D-compliant dispensary state license now to secure a California retail cannabis license in the future.
Because of Proposition D, there is no legal avenue for anyone to start new marijuana businesses in the City of Los Angeles or for anyone to legally purchase any of the 135 existing Proposition-D compliant dispensaries. But the tides may be shifting for the L.A. marijuana scene. On March 7 of this year, Angelenos will be voting on two ballot initiatives that could bring more regulation and oversight to marijuana businesses within Los Angeles city limits and that may, under certain circumstances, allow for an expansion beyond the existing 135 marijuana dispensaries.
In case you missed it, Proposition D, which passed in 2013 and was implemented in 2014, was intended to reduce the number of dispensaries within Los Angeles city limits to 135 – the number of dispensaries operating before September 14, 2007. A 2012 UCLA study estimated that Los Angeles had at least 472 dispensaries, and the city estimated that in 2013, when Proposition D passed, the city had around 700 dispensaries. Over the last few years, the City of Los Angeles has shut down hundreds of medical marijuana businesses that failed to meet Proposition D requirements for immunity. But new dispensaries pop up to replace those that have been shut down. The city has also fought hard to enforce a ban on cannabis deliveries and the California Court of Appeals has upheld that ban.
Los Angeles’s medical marijuana situation is reflected in California’s Medical Cannabis Regulation and Safety Act (“MCRSA“) of 2015. The MCRSA requires all applicants to first secure “local approval” before they can receive a California state cannabis license, with local approval meaning some form of local license, authorization, or permitting. Under the MCRSA, Los Angeles essentially received a carve out to be able to continue enforcing its Proposition D, regardless of whether a marijuana business receives a state license.
Then, realizing that Proposition D does not qualify as local licensing, permitting, or even authorization (since it’s really just a registration and taxation measure), combined with the fear that Los Angeles may never enact any form of “local approval” to enable marijuana businesses to secure state licenses, the California State legislature, tried to pass AB 2385, which would have dropped the local approval requirement for Los Angeles. Under AB 2385, marijuana business applicants under the MCRSA that could show compliance with Proposition D would be eligible to receive a California cannabis license. However, the governor vetoed AB 2385. Because Proposition 64 itself provides no special treatment for Proposition D, Los Angeles marijuana businesses will still need to comply with local laws to open their doors under the new recreational laws. What all of this means is that Los Angeles could be stuck with Proposition D and that means it will either have no medical marijuana businesses at all or only the 135 existing dispensaries assuming they all go recreational.
Until perhaps March 7. On March 7th, Los Angeles will vote on two ballot measures to replace Proposition D, which can only be repealed and replaced by a vote of the people. The first ballot measure, called the Cannabis Enforcement, Taxation and Regulation Act (“CERTA“), is backed by the City of Los Angeles. The second ballot measure is called the Los Angeles Marijuana and Regulation Safety Measure and that one was drafted by the United Cannabis Business Alliance Trade Association (“UBCA”).
The CERTA measure sets the stage for the City to enact whatever rules and laws necessary to regulate City of Los Angeles “cannabis activity” in the context of California’s new marijuana laws, while also creating new criminal and nuisance penalties and implementing new business taxes on marijuana sales. It also gives priority status in “processing of applications” to the existing 135 Proposition D dispensaries, but it does not say that the City is limited to regulating only those 135 dispensaries nor does it forbid the City from creating regulations for other marijuana businesses like cultivators and manufacturers.
The UCBA ballot measure is much more comprehensive than the CERTA. This measure would create the Los Angeles Department of Medical Marijuana Regulation to oversee the Collective Commercial Cannabis and Commercial Cannabis permit programs, which would cover both medical and recreational marijuana businesses. This measure would also allow for permitting of cannabis cultivation, manufacturing, transportation, testing, and distribution businesses. Like the City supported measure, this measure too will give licensing priority to existing 135 Proposition D dispensaries; it calls for mandating that the City continue to allow these 135 cannabis dispensaries to operate and for these dispensaries to get their required permitting ahead of any new dispensary applicants. It also provides that if not all of the 135 existing dispensaries apply for and receive the required permitting, the City may allow additional dispensaries to participate in the Los Angeles cannabis market and that the City cannot have less than 135 dispensaries in operation. The measure also sets forth how the permit application process will work and the zoning and setback requirements required for all permit applicants.
Importantly, as of December of last year, UCBA has decided to formally support the City ballot measure. Nonetheless, the UCBA measure will still be on the ballot in March.
Though Forbes is predicting L.A.’s medical marijuana market could reach $1 billion, that’s not going to happen anytime soon unless the City starts allowing for significantly more marijuana commerce. The March 7 vote is crucial to the future of marijuana in Los Angeles as it will determine who can run or invest in a marijuana business in the City of L.A. and what it will take to do so.