Battle Royale? Phase three Cannabis Licensing in City of Los Angeles


1st come, initial serve for verified Tier 1 and Tier two applicants (that also have places prepared to go) for the initial 100 licenses OR a lottery technique to situation the initial 100 licenses (with different barriers to entry, which includes possessing a place on lock). And for the second 100 licenses, the DCR desires a merit-primarily based technique with different qualification criteria.

There had been other fairly critical suggestions produced in the letter to Committee with regards to other amendments to existing LA cannabis licensing laws, but the transform-up on the Phase three licensing procedure is, by far, the most impactful.

Even although the DCR has studied the foregoing challenges for months, the City Council was not but prepared to act on the DCR’s suggestions. On Friday, February 15, just after a hearing with Committee and then a hearing with Council with regards to the DCR’s suggestions, Council instructed DCR “to report back at the subsequent Guidelines, Elections, and Intergovernmental Relations Committee meeting with a additional evaluation of the suggestions for Phase three Storefront Retail processing and Non-storefront Retail processing, which includes consideration of a social equity applicant registry platform related to the City of San Francisco” and to “suspend any Phase three processing till the enhanced Social Equity evaluation for the San Fernando Valley, Boyle Heights, and Downtown Los Angeles is completed.”

What does all of this imply? Essentially, we’re back to square 1 in L.A., and original Phase three processing remains in location in spite of the DCR’s try at an overhaul. With no query although, Phase three licensing need to transform. The existing timing alone on issuance of Phase three licenses will bankrupt or scare off the vast majority of people today. 1st come, initial serve probably appeals to most people today, but it is just as imperfect and arbitrary as a lottery technique. So lengthy as the proper barriers to entry and restrictions are implemented, either technique can operate to effectuate fast and effective licensing (just ask Washington State whose greatest issue with a lotto technique was actually movement of winners just after-the-reality).

Lotto probably edges out initial come, initial serve if we’re speaking maximum efficiency, since it eliminates the timing stress and order of applicants at the outset when they file with DCR. With either proposal although, ambiguities would hinge about what a “complete” application definitely signifies and/or the capability of people today to game the technique by paying off family members members (or whomever) to act as straw applicants to raise their possibilities of achievement. Merit-primarily based also poses its personal challenges with regards to what qualities need to net you the most points, particularly when dealing with social equity applicants who stay the most well-known kind of licensing capital in L.A. and as a result the most vulnerable when it comes to scams and hawkish investor behavior.

Interestingly adequate at Friday’s hearing, Council did instruct the City Lawyer to draft an ordinance (with input from DCR) to, amongst other items:

  • grant short-term approval to phase three retailers (which would let them to immediately open their doors upon securing state licensure),
  • exempt non-storefront retailers from hearing just before the Cannabis Regulation Commission prior to complete licensure,
  • force Tier 1s or 2s to give a proper of initial refusal on ownership transfers to their current partners to acquire their ownership interests at marketplace price (just after expiration of the applicable Social Equity Agreement term),
  • bar from Phase three retail or delivery licensure applicants or landowners with “evidence” against them for illegal cannabis activity at any time given that January 1, 2018.

So, we know transform is coming to Phase three licensing albeit at a glacial pace. For now although, it seems that the DCR will definitely have to persuade Council on adopting its Phase three suggestions for the licensing procedure, or all Phase three stakeholders will invariably endure licensing by a thousand cuts.


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