Licensing

Overview of licensing types

A broad range of license types play an important role in a functioning cannabis market. As states and municipalities continue to implement medical and adult-use cannabis policies, the availability and accessibility of licenses will greatly facilitate the transition from an illicit to an above-ground market and ensure opportunities for a wide array of individuals, businesses, and communities. 

Listed below are examples of the types of cannabis licenses that should be made available, their function in the market, and an overview of their economic impact.

Retailer/Dispensary

Cannabis retailers—often referred to as “dispensaries”—are the consumer-facing businesses of the industry that sell cannabis and cannabis products directly to consumers. The extent that retailers are free to conduct delivery, run promotions, and advertise their products is subject to the individual state and local laws for which the business resides in.

Sufficient retail access is necessary to ensure that consumers are purchasing from the legal market. Arbitrary license caps only serve to restrict legal access points for consumers and facilitate illicit market activity. If there are not enough retail licenses to meet demand, then the illicit market will continue to exist while undercutting legal operators.

Policy recommendations

  1. Avoid caps on the number of retail licenses that can be issued in order to ensure adequate legal access for consumers.
  2. Allow retail storefront licensees to conduct their own delivery service.
  3. Allow retailers to use online platforms to advertise, list their services and products, and facilitate delivery and in-store pickup.

Retail non-storefront/delivery

A retail non-storefront license allows for operators to sell cannabis and cannabis products to consumers via delivery, without a consumer-facing retail store. Non-storefront delivery licensees are subjected to the same standards and regulations as traditional retailers; however, they do not allow consumer access or purchases on site.

Policy recommendations

  1. Allow for delivery services to conduct delivery into all jurisdictions. Delivery is a vital component in providing access to legal cannabis, especially for medical patients.
  2. Enable retail non-storefront licensees to use online platforms and third-party service providers to facilitate cannabis delivery.

Cultivation

A cultivation license authorizes a licensee to grow cannabis for commercial purposes. Cultivators engage in the growing, trimming, drying, and curing of the cannabis plant. Cannabis can be grown indoors, outdoors, or in a greenhouse, with indoor cultivation being the most common. Some states break down their cultivation licenses by size (speciality, small, medium, large) and type (indoor, outdoor, mixed-light etc.), whereas some states have one all-encompassing cultivation license. Offering a wide range of cultivation licenses promotes a diverse community of cultivators and helps ensure that growers have legitimate access to the legal market.

Policy recommendations

  1. Establish a tiered licensing structure based on size and type of operation. This will promote a diverse range of cultivators and help ensure that small operators are not left behind.

Distribution

The most basic type of distribution license authorizes a licensee to transport cannabis and cannabis products between licensees along the supply chain, from cultivation to the final point-of-sale. The scope of a distribution license varies from state to state. Some states allow distributors to facilitate cannabis testing and enforce packaging and labeling compliance, whereas other states only allow distributors to serve as merely a transportation service.

Policy recommendations

  1. Distribution licenses should be available for both independent third-party distributors, as well as other licensees who wish to self-distribute.
  2. Self-distribution should not be mandatory, but it should be an available option for licensees.

Manufacturing Processing

Cannabis manufacturers take the flower and trimmings of the cannabis plant and manufacture them into finished products like cannabis oils, edibles, and concentrates. Manufacturers are also responsible for packaging and labeling cannabis products in accordance with their state’s laws. 

Note: “Manufacturers” and “processors” are often used interchangeably and the verbiage depends on the individual state.

Policy recommendations

  1. Allow manufacturers the flexibility to utilize a full range of methods for processing cannabis, including traditional mechanical methods of extraction and the use of volatile or nonvolatile solvents.
  2. Manufacturing licensees should have the option to harvest cannabis at a cultivation facility.

Laboratory Testing

A laboratory testing license allows a facility to test cannabis and cannabis products for a variety of substances, including cannabinoids, pesticides, and residual solvents. The purpose of cannabis laboratory testing is to ensure that all cannabis products meet state safety and public health requirements,  which enables businesses to foster a sense of transparency and trust with their consumers. There is a great deal of variance in testing requirements among states with legal cannabis, and there is a great need for standardization.

Policy recommendations

  1. All cannabis products should undergo mandatory analytical testing that includes cannabinoid and terpene content.
  2. Testing methodology requirements should align with national standards.
  3. Allow licensees a minimum of 6 months to align their operations with new testing standards.

Microbusiness

A microbusiness license allows business owners to vertically integrate. A single microbusiness may engage in every step of the process, from cultivation to the final point of sale, or a microbusiness may only participate in a few processes, such as cultivation, manufacturing, and distribution.

Policy recommendations

  1. Allow licensees to operate on multiple levels of the supply chain, but mandatory vertical integration should not be a requirement.
  2. Microbusinesses should be required to engage in a minimum of two commercial cannabis activities up to every process along the supply chain.

Social consumption

A social consumption license allows for the onsite consumption of cannabis at a licensed facility. Consumption lounges are an access issue, as many states currently deny medical and adult-use consumers a safe place to legally consume cannabis. Designated spaces for consumption offer a solution for individuals who face the dilemma of being prohibited by their landlord to consume in their respective dwelling and not being able to consume in public or in a vehicle. This is especially pertinent for those who live in federally subsidized public housing who face eviction if they are caught in possession of cannabis. As long as cannabis is classified as a Schedule I substance at the federal level, social consumption lounges provide an interim solution for those who are unable to consume their legally-purchased cannabis without risking eviction or a possible citation.

Social consumption lounge policies should facilitate a wide range of business models, from restaurant-style settings where cannabis can be purchased alongside food, to venues where individuals bring and consume their own cannabis products. When developing a licensing framework for social consumption lounges, there should be parity in cannabis and alcohol regulations regarding food service. Many states and local governments that permit social consumption lounges do not allow food to be sold on the premises, yet this is commonplace for bars and other alcohol-serving institutions. To promote economic viability and consumer safety within the cannabis industry, policies should enable licensees to tailor their business models to the specific demand and needs of their consumer base.

Policy recommendations

  1. Allow social consumption both on the premises of cannabis retailers and at standalone social consumption lounges.
  2. In addition to permitting onsite cannabis sales, allow social consumption lounges to serve food to consumers.

Cannabis event organizer license

A cannabis event organizer license allows an individual or a company to host cannabis events, typically with onsite consumption and sales. Examples of cannabis events include music festivals, trade shows, and educational forums. The scope of a cannabis event license varies depending on the jurisdiction, with some states restricting cannabis events to consumption only and other states allowing for vendors to conduct onsite sales. To legally host cannabis sales in jurisdictions where it is permitted, an event organizer licensee must hold a separate license or work with individuals who have the proper retail or microbusiness licenses.

Most jurisdictions, including California, Michigan, and Denver, require an individual to first obtain an annual cannabis event organizer license and then apply for a temporary event license for specific events. In addition to applying for a temporary event license, many states require licensees to obtain approval from the local government where the event will be hosted, in the form of a written agreement or a local permit.

Policy recommendations

  1. Allow cannabis event organizer licensees to host both onsite consumption and sales at cannabis events, while ensuring that restricted areas are apart of site plans to ensure that underaged individuals do not gain access to consumption or sales areas.
  2. Event licensing and approval processes should not be so burdensome and costly that they prevent cannabis events from occurring altogether.
  3. Allow cannabis events to be hosted in a variety of venues, from county fairgrounds to privately-owned buildings. Ensure that all temporary events adhere to state and local zoning and safety regulations.

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