Cannabis businesses from all areas of the supply chain had not been following mandatory compliance regulations.
California suspended more than 400 marijuana business permits last week, from companies operating in all areas of the state’s cannabis supply chain.
The state initially suspended the licenses of 394 cannabis businesses for failure to file the necessary paperwork. It then suspended an additional 13 manufacturers, upping the total number of businesses suspended to 407, equal to about five percent of California’s legal industry.
Fortunately, it was merely a regulatory move and not a sign of the world’s largest legal market being shut down.
According to the California Bureau of Cannabis Control (BCC), the businesses that had their permits suspended include retailers, distributors, delivery firms, and small businesses.
The companies had not been completing the state’s mandatory track-and-trace system, a seed-to-sale inventory program created by a Florida-based company called Metrc that allows state regulators to keep tabs on the legal cannabis supply chain. Participation in the system is mandatory.
None of the companies can operate legally until their licenses are reinstated.
There are 7,392 cannabis businesses with a license in California. Of those, the BCC oversees 2,630 companies with annual and provisional licenses, while the California Department of Public Health regulates 932 manufacturers, and the California Department of Food and Agriculture oversees 3,830 farmers.
The California Cannabis Industry (CCIA) believes that the amount of suspended licenses is equal to 10 percent of the cannabis retailers and 20 percent of the delivery services in California’s legal market.
A BCC spokesman said that the businesses were all alerted to the issue three months ago and in late October as well.
“These were just the stragglers,” said BCC spokesman Alex Traverso. “It turned out to be a couple extra months that we gave them. It’s just a matter of getting a password, getting a login and doing the training.”
Traverso added that it would only take about three hours to complete the necessary compliance training and all businesses still have the opportunity to do so.
Some businesses have already taken the required steps to have their licenses reinstated.
Growing Pains in California
Despite being the largest cannabis market in the world, California’s legal industry has struggled to take hold since its launch in 2016.
California’s underground marijuana market continues to thrive, even as many had hoped legalization would stomp it out.
Some believe the recent suspension of licenses could give the underground market more market share. Californians are interested in more dispensaries within their communities, and could be more compelled to obtain their cannabis through illegal means.
“It’s minimizing their options,” said CCIA Communications Director Josh Drayton regarding the revoked licenses. “We’re kind of incentivizing the illicit market, which is a much more affordable option right now (for consumers). What we really need to be focused on is access and affordability.”
California’s legal market has been criticized for the high tax it puts on cannabis products, which drives up purchase price and allows the underground market to maintain its stronghold.
Drayton added that he believes that the BCC did not sufficiently notify businesses.