LA Expansion of Social Equity Licenses

Friends,

Los Angeles’s Department of Cannabis Regulation proposed significant changes to its cannabis business licensing rules and social equity program. On June 24th, 2020 the City of LA Rules Committee approved the recommendations from the Department of Cannabis Regulation which seek to:

• Allow the issuance of conditional Temporary Approval to Phase 3 Applicants.

• Allow businesses to relocate.
   
• Clarify the process for applicants to request a finding of Public Convenience or Necessity.
   
• Allow individuals to participate in the Social Equity Program based on the original criteria or new criteria as supported by the Expanded Cannabis Social Equity Analysis.
   
• Amend the selection process for Phase 3 Round 2 Type 10 retail application processing by establishing a selection process that identifies Social Equity Individual Applicants eligible for further process via a lottery process rather than an online, first-come, first serve process.
   
• Expand the definition of Equity Share and establish related requirements to provide additional protections to mitigate against potential predatory practices.
   
• Reorganize, clarify and include necessary procedures for the administration of the City’s commercial cannabis Licensing and Social Equity Program.
   
• Address recommendations put forth by the Cannabis Regulation Commission.
   
• Address extensive feedback from the licensing and Social Equity Program stakeholders.
   
• Add an additional 100 store-front retail licenses to Phase 3 Round 1. 
   
• Allow all other Phase 3 Round 1 applicants to obtain either a delivery, manufacturing or distribution license.

Amongst other notable changes, only social equity applicants would be able to obtain retail licenses (both storefront and non-storefront delivery) until January 1, 2025 under the proposed recommendations. This specific change is quite controversial because it would effectively prohibit all non-social equity applicants, including the many Los Angeles legacy operators, from being able to enter into the regulated cannabis market for the next five years.

These proposed changes follow the DCR halting licensing after its most recent “first come, first serve” licensing round became the subject of an independent audit. The City Council will vote as soon as this week to adopt the changes. If you have any questions about cannabis business licensing or the social equity program in the City of Los Angeles, please contact Andrew in our LA office at andrew@mcallistergarfield.com.