California Unveils Temporary Licenses to Allow Early 2018 Retail Sales

Lori Ajax, head of California's Cannabis Control Bureau, announced a temporary licensing program on Thursday. (Rich Pedroncelli/AP)

ANAHEIM—With the launch of California’s adult-use cannabis market just 101 days away, regulators will introduce a temporary licensing program aimed at ensuring a smooth start to regulated sales, the state’s top cannabis official announced on Thursday.

Lori Ajax, chief of the California Bureau of Cannabis Control, unveiled the temporary licensing program in a keynote address at the California Cannabis Business Conference, an industry event being held this week in Anaheim. State Insurance Commissioner Dave Jones also spoke about the ongoing effort to expand insurance coverage for cannabis businesses, specifically among major commercial providers.

With state-regulated sales set to begin on Jan. 1, there’s still considerable work to be done to implement new state laws around both medical and adult-use cannabis. The temporary licensing program is meant to bridge a gap until other rules and regulations are made final.

“It’s of course a huge challenge, it’s intense,” Ajax said at a Q&A with reporters, “but we will be issuing licenses on Jan. 1, 2018.”

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Bumper Crop of Applications Expected

Under the temporary licensing plan, businesses would need to provide some “pretty basic information,” Ajax told the keynote crowd, including a diagram of the premises and information about the owners. “This shouldn’t take you a long time to get out,” she said.

Applications are expected to be available in early December, Ajax said, after emergency regulations are adopted. “We don’t have time to do regular rulemaking,” she noted. That step comes next year.

Meanwhile, the Bureau of Cannabis Control is staffing up to accommodate what’s expected to be a bumper crop of applications.

While no licenses, temporary or otherwise, will be granted before Jan. 1, Ajax pledged that the office will work to issue the licenses as quickly as possible. Approvals will be sent via email, with the appropriate documentation attached, she said. “You’re just going to print out your license.”

Temporary licenses will be valid for four months from the issue date, Ajax said, although they can be extended for 90 days. And if the Bureau of Cannabis Control somehow lags on issuing permanent licenses, the temporary ones can be extended further. “If it’s on us,” Ajax pledged, “we will continue to give extensions so you can keep operating.”

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Key: Local Approval

The single most important qualification for would-be operators interested in obtaining a temporary license, Ajax stressed, is obtaining local approval. “The biggest thing is that they will have to have local approval for conducting commercial cannabis activity,” she said. “They will need that before the state can issue a temporary license.”

But while state law requires the approval of locals, it doesn’t clearly specify what that means. Could it be a letter from a neighborhood council? A resolution out of City Hall?

With nearly 500 cities in California, Ajax explained, her office isn’t adopting a one-size-fits-all definition. “We’re really relying on the locals to specify what that local authorization is,” she said, adding that the ultimate goal is simply to “confirm with the locals that that applicant is authorized by the locals to conduct commercial cannabis activity for that specified jurisdiction.”

Ajax confirmed that the two other state agencies with a hand in cannabis regulation, the state Department of Food and Agriculture and Department of Public Health, will also be issuing temporary licenses for entities they oversee. Licensing workshops will be held with all three agencies in “key areas around the state” beginning in October, Ajax said, so applicants “have a good idea of what they need.”

While Ajax acknowledged that the rollout might be bumpy at times, she emphasized that her office is doing everything it can—and that it’s always open to feedback. “I can’t promise everything’s going to be smooth on day one,” she said, but “we’ll do whatever we can to make things right.

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Cannabis Business Insurance Is Coming

Also taking the stage at the California Cannabis Business Conference was state Insurance Commissioner Dave Jones, who stressed that his goal is to ensure California’s cannabis market has access to insurance “from seed to sale.”

“My mission as insurance commissioner is insurance protection for all Californians, and that includes the cannabis industry,” he said.

While a number of niche, so-called surplus-lines insurers currently do offer insurance products to the cannabis industry, the plans tend to be expensive and available only to certain elements of the cannabis industry. “It means that there is some coverage available, but it’s not as competitive as it could be if the major commercial carriers come in, too,” Jones said, naming Farmers, State Farm, Nationwide, AIG, and others as examples.

To that end, Jones’ office has been soliciting filings from more mainstream insurers. “We’re very aggressively sitting down with senior executives of these companies and educating them about the cannabis industry,” he said. “I’m calling the CEOs of major commercial insurance companies personally as the regulator of the largest market in the United States.”

The effort has apparently made an impact. On Thursday, Jones announced that “we actually have one admitted commercial carrier that has filed a commercial product in California.”

Jones wouldn’t identify the carrier but said it would become public in a “matter of weeks.”

“We’re also hopeful you’ll stayed tuned, because we think others are going to file as well,” he added. “Once one does it, oftentimes the others will then say, “Gee, we can do the same thing.’”