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California Cracks Down on Unlicensed Cannabis Businesses

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Since the beginning of the year, California's Bureau of Cannabis Control has issued more than 1,000 cease and desist letters to marijuana businesses operating without state licenses.

"As of January 1, 2018, any business wanting to engage in commercial cannabis activity in California must have a license,” says Aaron Francis, Public Affairs Analyst with the Bureau of Cannabis Control.

This is the first step by the state in an attempt to shut down unlicensed marijuana businesses who are not paying state and local taxes on cannabis, unlike their licensed competitors. The Bureau of Cannabis Control has been using online platforms that advertise cannabis businesses to find those unlicensed businesses. The Bureau then sent notices to each business that included information on how they can apply for a state license.

"On the Bureau’s online licensing portal, there are also educational resources that walk potential applicants through the licensing process," says Francis.

The state is currently issuing temporary licenses which are free of charge and do not require application fees. Temporary licenses last for 120 days and may be extended by the Bureau for additional 90-day periods.

However, in order to qualify for a state license, businesses must first obtain a license, permit or other authorization from the local jurisdiction where the commercial cannabis operation would take place.

"Each incorporated city has their own cannabis ordinance,” says Sergio Ingström, Cannabis Licensing Consultant for Cannabis License Company.

Local jurisdictions set a limit on the amount of recreational cannabis business licenses available, which makes for a competitive bidding process. West Hollywood, for example, has eight adult-use retail cannabis business licenses available.

"These retail and delivery licenses are being snatched up by big companies that are spending a lot of money on marketing. All these small businesses are left out. I was really disappointed that there was no social equity program for West Hollywood,” says Ingström.

Meanwhile, fines for operating without a state issued license can cost up to three times the amount of the annual license itself, according to the Bureau. An annual license fee for a marijuana retailer can cost anywhere from $4,000 to $72,000 depending on the size of the operation.

"I think the state put way too much power in the hands of these small cities," says Ingström.

In the coming months, the Bureau of Cannabis Control will continue to search for and contact unlicensed marijuana businesses throughout the state with cease and desist orders.

"We're continuing to have internal discussions with our enforcement team to evaluate the next steps regarding unlicensed cannabis activity," says Francis.

The map below shows the locations of unlicensed marijuana businesses throughout the state that were sent cease and desist notices as of March 27, 2018. The names and locations on this map were provided to KCET by the Bureau of Cannabis Control as a part of an ongoing effort on their behalf to regulate unlicensed cannabis activity.  

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