Los Angeles Cannabis Retail Licensing May Get Derailed

Getting a cannabis license in Los Angeles has been notoriously difficult—and may be about to get worse as news dropped last week that a Los Angeles City Council member is recommending that the most recent phase of licensing applications essentially be suspended.

For some background on LA’s complicated licensing process, it has proceeded to date in multiple “phases” administered by the Los Angeles Department of Cannabis Regulation (“DCR”):

1. The first phase was limited to certain qualifying existing medical marijuana dispensaries (or “EMMDs”), and so far a little under 200 have been issued.
2. The second phase was open for only certain qualifying non-retail businesses with social equity requirements. It’s not clear yet how many phase 2 licenses have been issued.
3. The first round of the third phase (yes, there will be multiple rounds) opened for a 14-day period for only very small amount of social equity retail licenses on September 3, 2019.

For phase 3, round 1, the application window that opened at 10:00 AM and was on a first-come, first-served basis. In other words, those who submitted their applications first would receive priority review over all subsequent applications. This made applying at the opening window critical. Even though the phase 3, round 1 application window was open for 14 days, DCR received several hundred applications in the first few minutes. There were more than 700 applications submitted in the first few days.

Since the applications were submitted, the results and process have been scrutinized intesely. On October 28, 2019, Council member Herb Wesson alleged in a letter to DCR that:

Over the last couple of weeks, including at the Cannabis Regulation Commission meeting last Thursday, allegations have been made that multiple applicants had access to the application portal prior to the announced start time of 10 am on Tuesday September 3rd. Unfortunately these allegations have been substantiated by the Department at the Commission meeting and the Phase 3 Retail Round 1 process was compromised. While it was always understood that not every applicant would get a license, it is paramount that the application process have the utmost integrity, be transparent, and fair. There appears to be no scenario in which the Retail Round 1 process can meet those three principles currently.

If Wesson’s claims are correct, then this could present a major issue for phase 3, round 1 applicants. The results of any successful applicant could now be called into question. And that’s exactly what Wesson is calling for:

I am recommending that the Department: 1) suspend all Retail Round 1 applications; 2) refund all monies paid by Retail Round 1 applicants and cancel all invoices; and 3) prepare a full audit and report by an independent third party not involved in the process – unless there are other options like processing every application that would provide the necessary assurances that the process was not compromised. These are the only options that will provide the clarity and time we need to ensure that the Phase 3 Retail process is fair, transparent, and has integrity .

It’s unclear what the next step in this process will be, or whether anything will even happen. Even though Wesson is not a staff member of DCR, he is a City Council member, and DCR answers to the City Council. With sufficient support, it is possible that phase 3, round 1 results could be tested. Stay tuned to the Canna Law Blog for more updates on LA’s licensing process.