November 21, 2023

Los Angeles, CA

Following the passage of Senate Bill 51 (SB 51), which expanded the state’s provisional licensing for locally-verified equity retail applicants, the City of Los Angeles introduced an ordinance that would amend local law to coincide with SB 51. If signed into law, the proposed changes to Los Angeles Municipal Code will authorize the city’s Department of Cannabis Regulation to extend its own Temporary Approval licensing period and thus provide the relief intended by SB 51. Additionally, the proposed ordinance would grant L.A. equity applicants awarded a retail storefront license in the Phase 3 Retail Round 2 lottery additional time to secure a business premises location.

California Senate Bill 51 Extends Provisional Licensing for Equity Applicants Seeking Retail Licensure

On October 8, 2023, Governor Gavin Newsom signed SB 51, which effectively grants a five-year extension of the provisional cannabis licensure program for local equity retail applicants under state law. Pursuant to the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), the provisional licensing program was established as a pathway for early businesses to legally operate under a provisional license while working towards obtaining an annual license. This allowed pioneers of the novel industry to begin generating revenue while the state and licensees alike worked to fine-tune industry compliance standards. California’s end goal, however, has always been to transition away from the provisional licensing program and ultimately require all operators to obtain an annual license via a more rigorous application process.

Prior to SB 51, MAUCRSA prohibited the Department of Cannabis Control (DCC) from issuing new provisional licenses after June 30, 2023. Furthermore, previous state law enabled DCC to renew existing provisional licenses in 12-month periods only through January 1, 2025; all licensees would have been required to obtain an annual license by January 1, 2026 to continue operating. Pursuant to Governor Newsom’s ratification of SB 51, state law will be amended on January 1, 2024 to extend the life of the provisional license program for equity applicants. Under the revised law, DCC will have authority to issue new provisional licenses through January 1, 2031 for locally-verified equity applicants seeking a retail license. SB 51 will also authorize DCC to renew provisional licenses in 12-month increments for a period of up to five years after the initial issuance date.

Proposed Amendment to Los Angeles Municipal Code (LAMC) Coincides With SB 51

Historically, the City of Los Angeles’ Department of Cannabis Regulation (DCR) has issued “Temporary Approval,” a local license type akin to the state-issued provisional license, granting businesses the local authority to operate while working towards obtaining a more permanent “Annual License” issued by DCR. Much like the state’s intention to transition its provisional licensing program to an annual licensing program, the City of Los Angeles has long planned to sunset its Temporary Approval license type and ultimately require all operators to obtain a local Annual License.

As currently written, LAMC prohibits the Department of Cannabis Regulation (DCR) from accepting new Temporary Approval applications effective July 31, 2023 for equity applicants (referred to as “Social Equity Individual Applicants” or “SEIAs” in Los Angeles) and June 30, 2023 for all other applicants. These local deadlines were born in accordance with former California law regarding the sunsetting of state provisional licensing.

In response to SB 51’s extension of California’s provisional licensing program, two Los Angeles City Council members introduced a resolution urging Council to amend LAMC in conformation with state law. Specifically, the motion calls for the city to resume the issuance of Temporary Approval licenses and to extend the period under which Temporary Approval licensees can operate without an Annual License. Perhaps most significantly, the resolution urges Council to extend the December 8, 2023 deadline for Phase 3 Retail Round 2 (P3RR2) SEIAs to secure a business premises location for their storefront retail license. Under current LAMC, SEIAs who were awarded a storefront retail license in the P3RR2 lottery must abandon their application if a viable business premises is not secured by the December 8th deadline.

The resolution requests a draft ordinance that would amend relevant sections of LAMC to achieve the aforementioned directives. It also requests the inclusion of an urgency clause due to the looming nature of the December 8, 2023 deadline. In an unusual but unsurprising move, the Planning and Land Use Management (PLUM) committee, chaired by one of the motion’s authors, waived its consideration and sent the resolution directly to Council. Councilmembers unanimously approved the motion without deliberation, instructing the City Attorney to prepare a draft ordinance. Just two days after Council’s action on the resolution, the City Attorney submitted an ordinance for Council review. The ordinance is scheduled for a City Council vote on December 8, 2023.

If codified into LAMC, the ordinance would authorize DCR to issue Temporary Approval to SEIAs seeking a storefront retail license through January 1, 2031. It would further permit DCR to renew Temporary Approval licenses in 12-month increments through February 28, 2031 for SEIAs seeking storefront licensure and February 28, 2027 for all other applicants. The deadline for P3RR2 applicants who were awarded a storefront retail license to secure a business premises location would be extended from December 8, 2023 to December 31, 2026.

City Council and the City Attorney have demonstrated collective efforts thus far to advance these proposed changes with urgency, and the ordinance is expected to be adopted by prompt Council approval.