California Approves $100M Boost To Help Regulate Struggling Cannabis Industry

California is injecting $100 million into the state's struggling legal cannabis industry.

A new measure, proposed by Gov. Gavin Newsom, was approved by the California Legislature on Monday and aims to help legal cannabis operators acquire permanent licenses.

According to Newsom’s office, about 82% of the state’s legal operators still hold provisional licenses as of April 2021. These provisional licenses are due on Jan. 1, 2022.

While adult-use cannabis was made legal in the Golden State in 2016, most growers, retailers and manufacturers have been unable to transition from provisional licenses to permanent ones, which need to be renewed on an annual basis. 

This is due to the high cost of auditing operations to comply with environmental regulations, according to a report by the LA Times.

Los Angeles Mayor Eric Garcetti said the money is “essential in supporting a well-regulated, equitable, and sustainable cannabis market.”

Cannabis businesses would be able to use the money, which will be provided in the form of grants, to hire professionals that can help them complete the environmental studies needed to transition their provisional licenses to permanent ones.

“This grant program will certainly ease the burden placed on legal companies and allow regulators to work through the backlog of licenses at a faster pace," Matt Hawkins, managing partner of Entourage Effect Capital and chairman of the board at Harborside HBOR told Benzinga.

However, some in the California industry say the funding is not nearly enough to solve the systemic issue it’s meant to address: the state's lengthy bottleneck in getting annual business permits approved.

Jerred Kiloh, president of L.A.-based United Cannabis Business Association, said he’d prefer to see the Newsom administration focus on reforming the licensing process itself rather than throwing money at an existing problem, reported MJBizDaily.

Kiloh noted that because the $100 million is going only to cities and counties that have already approved legal cannabis programs, it won’t incentivize local governments that have banned marijuana businesses to change their stance.

The funding will be assigned initially to 17 eligible cities and counties, with LA receiving 22% of the amount.

Governor Newsom is pushing for a six-month extension of provisional licenses, from January to June 2022, which has yet to receive approval.

Harborside's Hawkins said industry stakeholders also support another potentially consequential bill that would incentivize local jurisdictions that currently prohibit regulated businesses to approve licenses.

"Both of these policies would create a framework that tangibly supports plant-touching operations,” Hawkins said.

Meanwhile, California remains the largest cannabis industry in the world, with nearly $3 billion in sales in 2019 alone.

Photo by Pedro Marroquin on Unsplash