MJ Biz: Provisional marijuana licenses ending in California, signaling higher barriers to market entry

Here’s the introduction to their report

The golden gates of California’s legal marijuana industry are scheduled to slam shut in a few months with the expiration of the state’s provisional license program, which insiders say will sharply increase the barriers to entry for newcomers.

Once the temporary permit program ends June 30, entrepreneurs looking to enter California’s legal marijuana industry will have two options:

  • Obtain an annual state license – a process that can take months, if not years, before operations can commence.
  • Buy an existing licensed company, a speedier prospect that could boost merger and acquisition activity.

“It truly favors the existing operators as they go forward,” said Rob Hunt, a principal at Linnaea Holdings in Carlsbad.

“I think it’s going to be much, much harder for new entrants to enter the market, without the ability to gain a provisional initially. I just don’t know if they have the capital to weather the storm.”

For now, provisional licenses remain the norm in California.

Only 3,378 of the state’s active 12,221 marijuana business licenses are full annual permits as of mid-January, according to the state Department of Cannabis Control (DCC).

That means a little more than 72% of the legal market – or 8,843 permits – are operating on provisional licenses.

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