A number of cannabis companies in California recently had their business permits suspended for failing to comply with a state-mandated product tracking system. Now, the state could see a slight disruption to its legal cannabis supply chain.
Business Permits Suspended
California authorities have suspended the business licenses of 394 cannabis companies. These companies represent a broad swath of the state’s legal industry, including retail, distribution, delivery services, and more.
Under current California laws, all cannabis companies must use a specific track-and-trace system to monitor all products. The idea behind this requirement is to limit any diversion of legal products into the illicit market.
For now, the state of California is requiring companies to use a product tracking software provided by a Florida-based company called Metrc. The tech company also serves the legal cannabis industry in 11 other weed-legal states.
The recent license suspensions affected companies in the process of switching over from temporary licenses to permanent licenses. Over the summer, temporary licenses expired and companies were supposed to get everything in order to meet the requirements for a permanent license.
However, there were still a number of companies that had not yet complied with the requirement to use Metrc’s tracking system.
State authorities reportedly contacted those companies in October and told them that licenses would be suspended on November 1 for those companies that had not yet started using Metrc. Those businesses had their licenses suspended last week.
According to the Associated Press, the business licenses that are now suspended could affect up to 5 percent of California’s legal supply chain.
Getting Things Back on Track
Some involved with California’s cannabis industry have pointed out problems with the suspensions. Specifically, some experts claim that slashing the number of legal businesses could shift economic activity into illegal markets.
“We’re kind of incentivizing the illicit market, which is a much more affordable option right now for consumers,” California Cannabis Industry Association’s Josh Drayton said. “What we really need to be focused on is access and affordability.”
On the other hand, some state authorities are downplaying the seriousness of the situation. In particular, some are saying that it’s actually very easy for businesses to get their licenses back.
“These were just the stragglers,” Bureau of Cannabis Control spokesperson Alex Traverso said. “It turned out to be a couple extra months that we gave them. It’s just a matter of getting a password, getting a log-in and doing the training.”
He added: “These are growing pains. I think we knew it was going to be a process and it was going to take some time, and that it was going to be an adjustment period for a lot of people who have been doing things one way for some time now. It’s relatively easy to get your license out of suspension.”
According to Traverso, companies simply need to sign up with Metrc and begin using the system.
In fact, he said that many companies affected by the suspensions have already started complying. Specifically, 80 businesses have reportedly already enrolled in Metrc since having their licenses suspended.
In total, California has 7,392 licensed cannabis businesses. There are currently 2,630 with either provisional or annual licenses. Among those, there are reportedly 932 manufacturers and 3,830 farmers.