The cannabis industry in Los Angeles is at a critical crossroads.
As the California Department of Cannabis Control (DCC) phases out provisional licenses through 2025—requiring operators to transition to annual licenses—LA businesses are also grappling with a host of systemic issues at the local level.
This article examines the broader industry frustrations within the LA cannabis industry including steep fee hikes, ineffective program delivery, lack of enforcement against illegal operations, and growing distrust in the city’s regulatory infrastructure.
Drawing on recent Department of Cannabis Regulation (DCR) reports and Cannabis Regulation Committee (CRC) meetings, this piece highlights the urgent need for structural reform, fiscal transparency, and responsive governance to prevent the collapse of LA’s legal cannabis market.
Finally, we outline the final steps for converting provisional DCC licenses under the DCC and DCR.
LA Budget 2025 – 2026 – DCR Report to Explain Significant Fee Increases Falls Short.
Over the past few months, the DCR has released a series of reports that outline their “need” to institute exorbitant fee increases on licensees over the next few months.
The April 22 report delivered from the DCR to the LA City Council highlights what it believes to be its “Top-Line Core Services”—application review, social equity program management, and compliance enforcement.
However, based on extensive experience, industry stakeholders argue these services have been poorly delivered. Anyone who operates or works with cannabis businesses in the City of Los Angeles knows that the application and licensing process is overly complex, inefficient, and costly, with excessive bureaucracy and frequent form changes that hinder basic business operations.
Despite soaring personnel costs and staffing increases since 2020, service delivery has not improved. Rather, stakeholders report that many DCR roles appear completely disconnected from actual operational needs, leading to misallocated resources and redundant structures that fail to address industry challenges.
The DCR’s Social Equity Program, originally designed to support communities harmed by the War on Drugs, is also widely viewed as ineffective. While DCR touts comprehensive educational initiatives and technical assistance, licensees and attorneys assert these efforts are either unhelpful or nonexistent.
With the program’s impending expiration at the end of 2025, combined with fee increases and limited funding options for applicants, has prompted calls to end or drastically reform the current DCR regulations. Public commentary reflects a deep frustration with rising costs, lack of support, and systemic barriers that disproportionately affect small and equity-focused businesses.
Compliance and enforcement services similarly fall short, with DCR pointing the finger at budget constraints. However, this undermines the entire regulatory structure, forcing legal operators to bear the burden of lax enforcement, excessive fees, and poor interagency coordination.
Stakeholders report lost payments, unjustified delays, and even wrongful raids due to DCR mismanagement. Despite increasing fees and staffing levels, there is no corresponding improvement in services. Industry professionals urge the City to implement structural reforms, reduce tax burdens, and streamline regulatory processes to ensure the survival and growth of LA’s legal cannabis market.
Backlash from the LA Cannabis Community Directed at DCR.
At the most recent CRC meeting (May 15, 2025), numerous stakeholders voiced strong frustrations regarding the state of the cannabis industry in Los Angeles, specifically highlighting systemic failures within the DCR.
Several speakers, including Catalyst’s Elliot Lewis, emphasized that legal operators are burdened with excessive taxation – sometimes totaling up to 45% – while facing unchecked competition from illicit businesses. Cannabis Professionals cite to the fact that the cannabis taxes fund approximately 17% of the City’s General Fund without having access to any of these funds for services. Rather, the DCR is a “full cost recovery” agency and must fund itself with its licensing fees.
Most speakers called for an immediate tax overhaul, the dismantling or restructuring of DCR, and the redirection of resources toward meaningful enforcement efforts. They argued that the current regulatory environment offers no real incentive for compliance, with legal businesses being “regulated out of existence” and receiving little to no support from the city.
Participants also criticized the city’s lack of responsiveness to industry concerns. There were repeated demands to place taxation and enforcement on the official agenda, yet speakers felt these requests have consistently been ignored. They reported that DCR services are inefficient – communications are delayed, licensing is convoluted, and updates to regulations are not transparent or inclusive.
Ultimately, the fee study was widely viewed as a cash grab by DCR, further straining already struggling operators. Many also expressed anger over the city’s unwillingness to address illegal operations, which are rapidly growing in number, with over 4,000 estimated today compared to 800 in 2018.
Social Equity applicants expressed particular disillusionment, noting that the program has failed to fulfill its original promise of restorative justice. Instead, it has led to additional financial and operational trauma for many who were already disadvantaged.
Calls for a dedicated taxation meeting and broader reform were common throughout the meeting, with repeated demands for the CRC to take a stand and hold DCR accountable. The consensus is clear: without immediate and substantial change, the legal cannabis market in LA faces imminent collapse.
Annual Licenses – Transition from Provisional Must Happen by End of 2025.
All cannabis operators should be aware by now that the DCC has ended the provisional license program, except for Social Equity applicants. This means all provisional licenses must now be converted to annual licenses.
To complete this transition, the DCR must first issue a Notice of Complete Application. After that, DCR generates an Environmental Review Invoice, files the required CEQA documents with the County, and the associated CEQA reports are posted to CEQAnet. The DCC then uses CEQAnet to confirm the CEQA exemption status of each licensee, which is required before a provisional license can be converted to an annual license.
It’s critical for all licenses who hold provisional licenses to complete this transition before their DCC license expires in 2025. Failure to do so will result in the license expiring and the operator losing legal authorization to conduct cannabis business through that license.
Where Do We Go From Here? Hopefully, Five Steps Forward.
To be candid, Los Angeles’ legal cannabis industry literally stands on the brink of collapse unless swift, structural reforms are enacted. The mandatory transition from provisional to annual DCC licenses by the end of 2025 underscores an urgent need for streamlined regulatory processes and transparent governance.
Despite ballooning fees and expanded DCR staffing, operators continue to report minimal improvements in service, nonexistent enforcement, and a regulatory framework that fails to meet real-world business needs. Social Equity applicants, in particular, continue to bear the brunt of systemic dysfunction, facing barriers that undermine the very goals of restorative justice.
To ensure survival and growth of the legal cannabis industry, the City must prioritize an overhaul of the DCR, implement targeted tax relief, and reallocate resources toward enforcement against illegal operators and meaningful support for legal businesses. A dedicated, solutions-oriented forum involving the Cannabis Regulation Committee, stakeholders, and city leadership is essential to restore trust and chart a sustainable path forward for the industry.
Five Steps Forward:
- Convene Emergency CRC Meetings: Place taxation reform, enforcement priorities, and DCR accountability on formal agendas with clear deliverables and public reporting.
- Commission an Independent DCR Audit: Evaluate staffing, spending, and service delivery against performance metrics to ensure fiscal transparency and eliminate inefficiencies.
- Streamline Licensing Processes: Simplify the annual renewal license conversion pathway, with clear timelines, guidance, and technical support for all applicants.
- Enforcement Against Illicit Operators: Develop incentives for compliance and collaborate with DCC for enforcement against illicit operators.
- Develop a Tax Incentive Program: Offer immediate temporary tax relief or rebates for compliant businesses, particularly small and equity-focused operators, to ease the burden during this regulatory transition.
Have Questions About Los Angeles’s Hemp and Cannabis Bills?
Los Angeles’s hemp and cannabis laws are constantly evolving—and so is the guidance you need to stay compliant. At Manzuri Law, we’ve been at the forefront of cannabis and hemp policy since long before regulation began. With deep roots in L.A. and a history of shaping local and state legislation, we understand the nuances of this market like no one else.
Whether you’re operating in the city or planning to enter it, we offer clear, practical legal support grounded in two decades of dedicated cannabis and hemp law experience.
Contact Manzuri Law today for tailored advice and representation that keeps your business prepared, protected, and thriving in the Los Angeles market.