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LA Committee Passes Marijuana Regulations in Prep of Recreational Market

The regulations are now being considered by the full Los Angeles City Council, as the city tries to prepare for the launch of its recreational marijuana market in three months.

With California’s recreational marijuana market slated for launch January 1, 2018, cities throughout the Golden State are busy legitimizing their respective cannabis industries by establishing regulations for growers, manufacturers, and distributors. Last week, San Diego became the first city in California to finalize the regulations for the entire cannabis supply chain. This week, the Los Angeles City Council committee approved regulations that spell out the requirements for adult use marijuana businesses looking to operate within its limits.

The regulations, which now move onto the full LA City Council for consideration, require that growers, manufacturers, and distributors first obtain a state license to operate.

If you’re a cannabis entrepreneur or operator of an already-operational medical marijuana dispensaries, you likely have concerns about the regulations. As they stand now, businesses serving the city’s medical marijuana industry would have to temporarily close at the first of the year as they wait to obtain adult use licenses – something that wouldn’t be guaranteed. Business and dispensary owners are worried the rule will force them to shut down permanently or leave LA city limits.

Ariel Clark, a Santa Monica-based attorney who specializes in cannabis law, recently told the Los Angeles Times she estimates that about 80 percent of LA’s marijuana industry would be affected by the requirement to shut down until adult use licensing applications are approved.

LA City Council President Herb Wesson acknowledged the issues after the regulations were drafted in June, but the rules were still approved by the committee as is. He has said he would consider a provisional license system to prevent the loss of revenue for businesses that are already operating.

Also under the approved regulations, retail businesses are prohibited from doing the following:

  • Holding special events
  • Giving out free samples
  • Displaying goods in places visible outside their premises
  • Providing forms of entertainment other than ambient music
  • Operating between the hours of 9 p.m. and 6 a.m.

They are also required to lock all cannabis goods in a locked safe or vault when the business is not open, maintain records of all financial transactions for seven years, and follow inventory tracking requirements.

The City Council committee is now discussing whether to make Los Angeles the first city in the U.S. with its own bank, which would be able to provide financial services to marijuana businesses. Wesson proposed the creation of a public Bank of Los Angeles during a speech in July. Cannabis businesses throughout the U.S. have historically been unable to receive banking services due to cannabis’s federal legal status. Wesson believes the bank could also be used to finance local entrepreneurs and invest in the city’s infrastructure.

Recreational marijuana legalization in California came about in November 2016 after voters approved Proposition 64, also known as the Adult Use of Marijuana Act. Beginning in January 2018, adults 21 years and older will be able to purchase and possess marijuana for recreational purposes. The state’s legal cannabis industry is expected to be worth $6.46 billion by 2020. LA City Controller Ron Galperin has estimated that LA could collect at least $50 million in tax revenue from marijuana businesses in 2018.

California is one of eight states to legalize recreational marijuana. You can learn more about cannabis laws in the U.S. by visiting our education page.