June 20, 2016

PropThe green lights aren’t so green for Los Angeles’ medical cannabis businesses.  We have a multi-billion dollar medical cannabis industry in California – arguably the largest in the entire world – our city takes up a majority piece of that pie.  And yet, we are still being haunted by Proposition D – a patchwork and, quite frankly, broken set of laws that prevent our City from taking advantage of the imminent green rush that will be created by the MMRSA and perhaps the AUMA, if passed in November.

Prop D and MMRSA Clash, Leaving LA Behind

As it stands now, Proposition D is incompatible with the MMRSA and, as a result, MMBs in Los Angeles would be left out when state licenses are issued.  This is because, under the MMRSA, state licenses will only be issued to MMBs that already have a local license from their city.  But, in Los Angeles no actual licenses are given to MMB’s by the City, actually, no licenses even exist. The only MMBs in Los Angeles that can purport to be in compliance with Prop D are the seemingly 134 Pre-ICOs and even then, they only enjoy a limited immunity, not a license.

LA Could Be Excluded From Needing a Local License

Assemblyman Reggie Jones-Sawyer is trying to address this issue with a cleanup bill, AB2385. Under a newly amended version of AB 2385, the State now asks the City to provide verification that the state license-seeking dispensary is one of the 134 Proposition D compliant dispensaries that were given limited legal immunity. This essentially puts the responsibility on the City to verify who is eligible for a State license.  This bill, however, would be moot if the City simply amended Proposition D to license MMBs.

Back to the Drawing Board to Amend Prop D

On May 3rd, after the State put the burden back on LA, Los Angeles City Council president Herb Wesson, Jr. introduced a motion directing city staff to explore options for a March 2017 ballot measure asking voters to amend Proposition D.  Specifically, Wesson’s motion asks city attorneys and other staffers to weigh ballot language that would effectively do the following:

  • allow Prop D dispensaries to conform to the MMRSA;
  • increase penalties and enforcement to close down all “illegal” MMB’s;
  • create a regulatory framework for the City to implement in the event the AUMA is approved in November; and
  • extend Proposition D’s gross receipts tax to all MMB’s.

Wesson’s motion is a huge step forward – at least symbolically – towards smart cannabis regulation in Los Angeles.  But it is still not enough.  Wesson’s motion asks city staff to weigh in on the four issues above, but these four issues barely scratch the surface of all the critical issues that are currently impacting our cannabis economy today.

The Motion as Stated

Wesson acknowledges in his motion that “it is time for the City of Los Angeles to make adjustments to Proposition D allowing the City’s medical cannabis regulatory framework to better conform with [the MMRSA].” This suggests the possibility that the City will finally issue local licenses or permits to MMBs – at least to Pre-ICO dispensaries.  While this is great news for all the pre-ICO shops out there, it still leaves the non-Prop D businesses high and dry. If the City only opens up licensing to pre-ICO operators, then only a handful of dispensaries will control the entire market in Los Angeles, not to mention leave other medical cannabis businesses out in the cold. Moreover, because MMBs are also banned in LA county unincorporated areas, this would effectively leave no room for competition or entrepreneurial spirit in the Los Angeles cannabis industry.

Licensing for Delivery and Cultivation?

And what about delivery services which are currently banned under Proposition D?  Delivery services support the most chronically ill and immobile patients who cannot make it to storefronts, yet these businesses are being systematically shut down by local police.

In short, while the intent behind AB 2385 and Wesson’s recent motion is laudable, these proposed measures can only be as strong as the local laws upon which they rest.  In its 3 years of existence, Proposition D has failed to prove itself as a functional regulatory framework.  As such, Proposition D should not (or cannot) be used as the barometer for state licensure in Los Angeles.

Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.

Contact one of our cannabis law firm specialists today by phone at 310-912-2960 or online.

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