California Cannabis Regulators Ramping Up Enforcement

By Jordan Wellington, Simplyfya Cofounder and Chief Compliance Officer

It has been about four months since California launched its adult-use cannabis market, and regulators are ramping up enforcement efforts, assailing businesses that have not been licensed and conducting inspections of those that have.

The state’s Bureau of Cannabis Control has already sent out more than 900 cease-and-desist letters to plant-touching companies, ordering them to halt operations until they obtain the proper licenses, and its online complaint system has received hundreds of complaints from across the state, most of which concern unlicensed activity.

Less than 1 percent of an estimated 68,150 cannabis growers in California have obtained a valid license, according to a report released in February by the California Growers Association, and officials estimate there are more than 200 unlicensed dispensaries are operating in Los Angeles alone. Licene violations can result in “penalties totaling up to three times the amount of the license fee for each violation,” according to the BCC’s cease-and-desist letters. That equates to some potentially hefty fines, seeing as license fees range anywhere from $500 to $125,000 depending on the type and size of the business.

The low rate of businesses getting licensed is partly due to the complex and, at times, contradictory rules that make up California’s regulatory system. For example, cannabis businesses are not able to apply for a state license until theyobtain a permit or other form of approval from their local jurisdiction, but as of late last month, experts estimated only about 33 percent of California’s 482 cities and 58 counties hadcreatedregulatory programs.

Companies that have obtained the proper licenses are operating on much sturdier ground, but they are still not out of the woods. Rather than receiving letters, a growing number of them are receiving unannounced visits from state and local officials there to conduct regulatory audits.

At the most recent California Cannabis Industry Association conference, regulators shared data on the compliance issuesthey found most often when investigating licensees. With cultivators, for example, they reported many are exceeding allowable canopy sizes and failing to obtain weighmaster licenses. With manufacturers, they found several had failed to have their closed loop extraction systems certified by a California-licensed engineer. And with retailers and distributors, they have encountered a variety of packaging, labeling, and security issues.

Cannabis businesses clearly have a lot on there plate, but fortunately there are a wide variety of companies and products out there that are designed to make this new system a little easier to swallow.

One of them is Simplifya, a company I co-founded with several other cannabis policy experts. It has created a web-based compliance tool that enables companies to identify areas of noncompliance and hold employees accountable for remediation. Simplifya also offers afeature that assists companies in developing the standard operating procedures required to apply for a state business license. And just this week, in light of California regulators ramping up inspections, Simplifya announced it is offering free access to its SOPs for state and local regulatory audits.

Jordan Wellington

Jordan Wellington is chief compliance officer at Simplifya and director of compliance at Vicente Sederberg LLC. He previously served as a policy analyst for the Colorado Department of Revenue Marijuana Enforcement Division, where he helped develop the state’s adult-use cannabis regulations.