A new combined activities license will be available to cannabis businesses next year now that Gov. Gavin Newsom signed SB 1064. However, a new state license will not be required for cannabis cafés under separate legislation the governor also signed.
SB 1064, signed Sept. 28, creates a new license that authorizes two or more commercial cannabis activities at the same premises, with the exception of laboratory testing.
The legislation, introduced by Sen. John Laird and co-sponsored by the California Cannabis Industry Association, is intended to streamline the licensing approval process. Currently, operators have to apply for a separate license for each activity at a single location or have a microbusiness license, which allows for a minimum of three of four activities at a single location including cultivation up to 10,000 square feet.
Additionally, an owner who has previously submitted fingerprints and other required information for a license will not have to resubmit the same information for a subsequent license.
The Department of Cannabis Control did not respond to questions about the rulemaking process to implement the law, which takes effect Jan. 1, 2025, before deadline.
The changes were recommended in a report released in February by the Cannabis Policy Lab, “California Cannabis Report: Licensing and Market Access,” which was cited in a Senate floor analysis of the bill.
“The report is critical of California’s current model, noting that fundamental challenges in the regulatory framework are impeding the functionality of the many aspects of the State’s cannabis program. The first of the recommendations published in the report urged lawmakers to, ‘simplify the state license structure,’” the Senate report said.
Amy O’Gorman Jenkins, who has served as the CCIA’s legislative advocate for 10 years, said the bill introduced Feb. 9, originally had more licensing recommendations from the Cannabis Policy Lab’s report, including a dual-structure licensing system that would separate the applicant’s “character and suitability” from the premises where the activities took place.
But with a $12 million price tag at a time of a budget deficit, the bill was stripped down following technical amendments from the Department of Cannabis Control. Now the costs are expected to be approximately $500,000, she said.
O’Gorman Jenkins said that while the final law doesn’t include the substantial reform the CCIA previously envisioned, it was still a step forward.
“The objective we had was to simplify cannabis licensing. This was a step in the right direction. But more work needs to be done,” she said.
However, the organization may not pick up the cut pieces for new bills next year because they will be focused on minimizing a potential excise tax increase in July that’s triggered under AB 195, signed in 2022.
“I’m fearful that a lot of these other very, very important licensing policy issues will take a back seat,” she said.
Local governments to control cannabis cafés
After vetoing a similar bill last year over concerns about employee safety, Newsom signed AB 1775 on Sept. 30, allowing for cannabis cafés. It was introduced by Assemblymember Matt Haney and sponsored by California NORML.
Rather than create a new state license, the law allows licensed retailers or microbusinesses in areas that allow consumption lounges to serve non-cannabis food and non-alcoholic beverages, as well as present live entertainment, at their establishments with local approval.
The DCC will not enforce local laws. If the city revokes any local license, permit or authorization, it is to notify the state. Within 60 days of being notified, the DCC will consider suspending or revoking the state license.
In his signing letter, Newsom made clear the responsibilities of local authorities:
“While I am signing this bill, any future measure that diverges from this tailored approach will not be looked upon favorably. Furthermore, it is critical that local governments utilize this delegated authority responsibly by prioritizing worker safety and implementing stringent safeguards that minimize public health risks when authorizing these activities. If adequate protections are not established at the local level, it could necessitate reconsideration of this limited expansion.”
The new law also prohibits hemp products at these businesses.
CalNORML has a list of more than 40 cannabis consumption lounges statewide.
“The buzz has been great about AB 1775, people are psyched to go to cannabis cafés! There are currently too few places or events where cannabis consumers can gather and enjoy each other’s company, as well as food or music,” California NORML Deputy Director Ellen Komp said in an email.
“Anything that can help legal retailers stay in business in the face of over-taxation and regulation is a good idea for California,” she added. “The challenge will be gaining local approval, as it has been for cannabis retailers and lounges in general.”
Brandon Levine, owner of microbusiness Mercy Wellness in Sonoma County, understands this challenge and has been waiting for AB 1775 to pass. Levine is in the process of opening a cannabis lounge in the City of Cotati. He told CRB Monitor News it will a 3,400 square foot “ultra lounge,” with indoor and outdoor entertainment areas.
“Food will be a very important part of that experience. People who smoke pot, they get hungry,” he said.
Cotati already permitted Mercy Wellness to host some entertainment events. But he’s paused that while he builds out the new lounge space, which already has a commercial kitchen. Completely funding the project himself, Levine hopes to finish construction by the end of the year and then open as an entertainment and consumption lounge.
But he won’t be able to prepare food until the Sonoma County Department of Health Services comes up with regulations. For over a year, he’s been in discussion with department officials, who were waiting to see what the state would do with the bill. Levine’s not sure when he’ll get that approval.
“We will be at a standstill with the food part of it until the health department passes their regulations and we apply for a permit,” Levine said.
Until then, he will be allowed to serve catered food and pre-packaged food and beverages.
Levine, who also sits on the state’s Cannabis Advisory Committee, said AB 1775 is a “great bill” that “gives the cannabis industry opportunities to grow.”
AB 1775 also takes effect Jan. 1.
