Senate Bill 67 and What it Means for Businesses with Expiring Temporary Cannabis Licenses

How Temporary Cannabis State Licenses Came About

As part of the enactment of the legal California cannabis regime, the three state licensing agencies (the Bureau of Cannabis Control, the CA Department of Public Health, and the CA Department of Food and Agriculture) were granted authority to issue Temporary State Licenses during 2018, which allowed cannabis businesses to operate while they awaited approval of their Annual State Licenses.

Throughout 2018, operators that had local authorization to operate applied for Temporary State Licenses, which were valid for 120 days. In order to obtain an extension to the Temporary State License, the operators were required to submit their Annual State License applications. Notably, however, the licensing agencies’ authorization to issue Temporary State Licenses only lasted through 2018.

Cannabis Businesses Stuck in Limbo

At the end of 2018, many operators scrambled to submit initial Temporary State License applications and Annual State License applications, in order to have their Temporary Licenses valid into 2019. Now, in 2019, the Temporary State Licenses cannot be extended or renewed.

Therefore, concern is rising within the cannabis industry as many of these Temporary State Licenses are set to expire or have already expired, while these cannabis businesses are still awaiting issuance of annual permits. The expiration of these Temporary State Licenses renders the businesses unable to legally operate in California and threatens the legal cannabis market supply chain.

Senate Bill 67 (SB 67) to the Rescue

Senate Bill 67, Introduced by Senator McGuire (and principal coauthor Assembly Member Wood) on January 8, 2019, seeks to help alleviate this imminent danger confronting the legal cannabis industry via amendment of Sections 26050.2 and 26050.3 of the Business and Professions Code.  The bill is an urgency ordinance, meaning that it is to take effect immediately.

As currently drafted, “[SB 67] would revalidate an expired temporary license if the licensee submitted an application for an annual state license before the licensee’s temporary license expiration date, and would require the extended temporary license to expire on December 31, 2019, unless otherwise revoked. [Senate Bill 67] would revoke the temporary license’s validity after the licensing authority issues an annual license or provisional license for the same premises and the same commercial cannabis activity for which the temporary license was issued, or 30 days after the licensing authority denies or disqualifies, or the licensee abandons, the licensee’s application for an annual license. The bill would not entitle the applicant or licensee to a hearing or an appeal of the licensing authority’s refusal to extend a license or the revocation or suspension by the licensing authority of a temporary license. [SB 67] would specify, among other things, that a temporary license does not obligate the licensing authority to issue that licensee an annual or provisional license.

Additionally, SB 67 would authorize a licensing authority to issue a provisional license to an applicant that holds an extended temporary license for the same premises and the same commercial cannabis activity. [SB 67] would authorize a licensing authority to issue, after the licensing authority has granted, disqualified, or denied all annual license applications submitted by temporary licensees with an extended temporary license, provisional licenses to applicants without temporary licenses if specified conditions are met.” 

The Next Steps for SB 67

Marijuana Business Daily reports that Senator McGuire stated that “Best-case scenario, making it through all policy committees and off the floor of the Senate and Assembly in the next 60-90 days.” Additionally, McGuire told the committee that only four provisional licenses and 52 annual permits have been issued. Additionally, Leafly reports that 1,496 temporary cultivation licenses will expire in March, 4,001 will expire in April, and the remaining temporary cultivation licenses will expire by July. As of the date of Leafly’s article (February 25, 2019) the CA Department of Food and Agriculture had issued 48 annual licenses.

Although the timeline for passing SB 67 would not help with the expiration of the licenses expected to expire this spring, perhaps the silver lining is that SB 67 proposes to “revalidate an expired temporary license if the licensee submitted an application for an annual state license before the licensee’s temporary license expiration date,” allowing those who had to stop legal operations to restart once SB 67 has passed.

At Rogoway Law Group, we work with clients to help them navigate California’s complex and ever-evolving regulatory landscape to acquire the necessary licenses and permits to operate a successful and compliant cannabis business. Overcoming an initial determination by the sub-committee which advanced a lower scoring applicant instead of our client, my colleagues (Blair Gue & Hilary St. Jean) and I recently obtained a 5-1 favorable vote from the Santa Rosa City Council, allowing our client to proceed through the CUP process for a cannabis retail outlet in Santa Rosa.

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