Cannabis License Types

A broad range of license types is essential to a well-functioning cannabis marketplace. A variety of licenses without restrictive caps will help the transition from an unregulated to an above-ground cannabis market and ensure opportunities for a wide array of individuals, businesses, and communities. 

Listed below are the most common cannabis license types.

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 deliver, run promotions, and advertise their products is subject to the state and local laws in which the operator is located.

Retail Non-storefront/Delivery

A retail non-storefront license allows an operator to sell cannabis and cannabis products to consumers exclusively via delivery. Non-storefront licensees are subject to the same standards and regulations as traditional retailers; however, they do not allow consumer access or purchases on site. Non-storefront retailers operate out of a warehouse or depot-like headquarters, out of which all inventory and delivery vehicles move.

Delivery

There are three different cannabis delivery models: storefront delivery, non-storefront delivery, and third-party/courier delivery. Storefront delivery is when a retailer/dispensary provides cannabis delivery services in addition to their regular in-store retail operations. Non-storefront delivery is when a retail non-storefront operator sells cannabis exclusively through delivery. Third-party or courier delivery is when a storefront hires an outside party to provide delivery services on their behalf.

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 (specialty, 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.

Distribution

A 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 distributors in other states serve as merely a transportation service for cannabis businesses.

Manufacturing/processing

Cannabis manufacturers take the flower and trimmings of the cannabis plant and process them into finished products like cannabis oils, edibles, and concentrates. Manufacturers are often also responsible for packaging and labeling cannabis products in accordance with state law.

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

Laboratory Testing

A laboratory testing license allows a facility to test cannabis and cannabis products for their cannabinoid content, potency, and a variety of unwanted contaminants, such as heavy metals, 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 notable variance in testing requirements among states with legal cannabis, and there is a great need for standardization.

Microbusiness

A microbusiness license allows operators to vertically integrate, but with limitations on the total size of the business. A single microbusiness may engage in every step of the cannabis supply chain, from cultivation to the final point of sale, or a microbusiness may only participate in a few processes, such as cultivation, manufacturing, and distribution. Microbusiness licenses create opportunities for small business owners to enter the cannabis industry and make the cannabis marketplace more competitive.

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.

Consumption Lounges

A consumption lounge license allows for the onsite consumption of cannabis at a licensed facility. Consumption lounges provide patients and adult-use consumers with a safe and legal place to consume cannabis. There are generally two consumption lounge license models: retail consumption lounges and independent consumption lounges. A retail consumption lounge license is an additional license or permit that allows a cannabis retailer or microbusiness to operate a consumption area separate from its retail space. An independent consumption lounge license allows for the operation of a standalone facility that sells cannabis products intended for immediate consumption at the establishment.

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