Additional DCR Fees Proposed, Licensing Opportunities, and Social Equity Extended
With each new year, new regulatory and licensing changes impact the California cannabis industry.
Recently, Los Angeles’ Department of Cannabis Regulation (DCR) has made several proposed policy changes that will impact the market in 2025. Below, we lay out these proposed policies, some of which will open up new opportunities in LA’s market, and others that may prove fatal to already struggling operators.
Despite Industry’s Financial Struggles, New LA DCR Fees for LA Operators to be Proposed to City Council in Early 2025
It is no surprise to anyone within the cannabis industry that legal, licensed commercial cannabis operators in California are struggling financially. Operators in Los Angeles, the state’s largest city, are particularly feeling the impact of the struggling cannabis economy.
Overtaxation, intensive and nonsensical regulation, excessive licensing fees, and a thriving illegal market have nearly put all legacy operators trying to survive in the legal market out of business. For the businesses that have survived California’s legal market, these burdensome policies continue to stymie any real financial success.
In Los Angeles, the DCR is charged with supervising the cannabis industry and has, unfortunately, continued to fail our operators. The DCR points to bureaucratic hurdles as the reason and the operators are left holding the bag.
In 2024, DCR implemented new and very expensive compliance requirements upon LA cannabis operators, such as LADBS Plan Check, Certificate of Occupancy updates, requirement of a novel operating permit, and annual license transitions for provisional license holders—requirements that will cost licensees tens or hundreds of thousands of dollars in additional annual fees to comply with.
Notably, the DCR believes that applicants are currently underpaying for the cost of licensing and compliance services provided by DCR. Accordingly, DCR has proposed to increase all licensing fees exponentially in 2025.
In addition to being financially burdensome, our analysis of the current fee structure indicates that much of the fees are unnecessarily duplicative and/or irrelevant in nature to some licensees.
Based upon an unreleased November 2024 Fee Study, the DCR will present the new 2025-2026 licensing rates to the City Council for consideration in early 2025. The anticipated fees increases are as follows:
| Base Application Fees | 2020 | 2025 | Change |
| Equity Share Review | $1,248 | $1,387 | 11% |
| Pre-Application Review Fee | $597 | $784 | 31% |
| Annual License Application Fee (Per Activity) | $7,691 | $12,347 | 61% |
| Standard Inspection (Per Activity) | $2,468 | $3,019 | 22% |
| Renewal Fees | 2020 | 2025 | Change |
| LIC Renewal Fee + Inspection | $10,954 | $16,643 | 52% |
| ANN Renewal Fee + Inspection (Per Activity) | $6,701 | $9,815 | 46% |
| Other Renewal Fee | $1,829 | $5,955 | 39% |
We believe these incrementally larger fee structures are based upon the notion that the industry is flush with cash and is able to sustain and make these gargantuan payments to multiple government agencies. This is not the case—the legal cannabis industry is struggling and these hefty fees will very likely put another significant portion of the industry out of business. Many are literally hanging on by a thread.
Thankfully, the cannabis community has the power to speak up and prevent the LA City Council from adopting DCR’s industry-crushing proposed fees. If you live and/or work in Los Angeles, we ask that you email and call your local council member to request a review and reduction to these egregious fees. The future of the LA cannabis industry depends on it!
Expanded Licensing Opportunities for Social Equity Applicants in 2025
Extension of Exclusivity Period and New Retail Lottery
DCR recently announced a host of licensing changes on the horizon. There are three important licensing changes that will create more opportunities for Social Equity applicants in 2025.
First, the DCR has agreed to extend the Social Equity exclusivity period—originally set to expire January 1, 2025—through December 31, 2025. This extension applies only to retail, delivery and cultivation licenses (though cultivation licenses are not currently being issued).
Second, DCR expanded the criteria for what constitutes a “Social Equity Individual Applicant” (SEIA). The municipal code amendment “removed the “Disproportionately Impacted Area” criterion entirely, and eliminated the California-specific component to the “Cannabis Arrest or Conviction.” This will open up new licensing opportunities to individuals who meet this revised 2025 SEIA criteria.
Governmental Agencies across the country have implemented Social equity programs with the objective of increasing diversity and opportunity to participate in the cannabis industry for individuals that have been most impacted by the criminalization of cannabis.
However, a series of lawsuits across the country seek to invalidate social equity programs by arguing that these initiatives unconstitutionally prioritize state residents for cannabis business licenses. This active threat of litigation has inspired local lawmakers to change their approach to social equity, like we see here with the DCR’s expansion of who qualifies as a SEIA.
Finally, with this new expanded criteria in mind, the DCR has also agreed to administer a new, one time Storefront Retail lottery this year. The 2025 lottery will have three drawings: “(1) SEIAs previously verified under the 2019 SEIA criteria; (2) SEIAs previously verified under the 2022 SEIA criteria; and (3) SEIAs verified pursuant to the new, 2025 SEIA criteria.”
There has been no further guidance on the timeline for this lottery so stay tuned! In the meantime, SEIA applicants should continue to take advantage of the current delivery licensing opportunities and be prepared for a new lottery in 2025.
Update to “Undue Concentration” Aims to Provide Less Restrictive Leasing Opportunities.
Another important change implemented by the DCR this year is the revision to the parameters of “Undue Concentration”. Undue Concentration occurs when a higher ratio of cannabis licensees to population occurs within the community plan area.
These figures were revised for 2025, allowing for more cannabis businesses per population:
- Ratio of one License per 7,500 residents for Storefront Retailers (previously per 10,000).
- Ratio of one License for every 2,500 square feet of allowable cultivated area (previously capped at 15 Licenses per Community Plan Area (CPA).
The definition of “License” has also been revised to now include Pre-Application Records and Annual License Applications making Undue Concentration verification easier. The DCR is hopeful this change will allow licenses to “avoid submitting Applications in an area with more Applications than available locations.”
It is Imperative to Stay Up to Date on All Taxes, Fees and Fines
Licensees should always remember to stay current on all taxes, fees and fines especially because DCR now restricts any modifications to the application or license, if delinquent.
This restriction prohibits an Applicant from avoiding City-owned liabilities simply by “submitting a new application for, or transferring a license to, a debt-free entity.” So, if licensees want to maintain flexibility in modifying their licenses, it is essential that they stay up to date and compliant with all taxes, fees and fines.
Need Help Navigating DCR Cannabis Licensing Requirements? Manzuri Law Can Help
Not even a decade into legalization, the Los Angeles cannabis bubble has burst and all operators have felt the impact of a struggling cannabis economy.
Unfortunately, rather than providing operators relief, the DCR has increased fees and made several policy changes that may not positively impact the LA market in 2025. Indeed, these changes may prove fatal to already struggling operators by thrusting more operators and competition into the space.
Unfortunately, without significant change to the foundation of the licensing process, taxation, and the associated fees, the industry as a whole faces insurmountable challenges on a path to any type of continued success, especially without any positive federal changes.
Manzuri Law, unlike any other law firm, has worked alongside the cannabis industry to support their legal needs, especially in times of hardship. Many of our clients’ CA cannabis businesses have been acquiring out of state assets in order to thrive in stronger markets. In response, our attorneys have gotten bar certified in various jurisdictions. If you are interested in growing your business or need support on maintaining your legal needs, continue to read our newsletters for all upcoming changes and events and please feel free to reach out for help today.