MCRSA LICENSING ROADMAP

Posted by Meital Manzuri, Esq. | Sep 20, 2016 | 0 Comments

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For medical cannabis business owners, knowing how to navigate the complexities of the MCRSA's licensing restrictions will quickly become the key to maximizing business potential.  In general, licensees can only hold licenses in up to two separate license categories.[1]   But … it's not as simple as it sounds.  The current licensing restrictions are actually quite complicated and deciphering all the “legalese” in the MCRSA is not the easiest of tasks. 

If you (like most people) are unclear about how many licenses you can or cannot hold – all while staying compliant with the MCRSA – this simple “road map” will hopefully provide some clarity and serve as a good starting point for planning the future of your cannabusiness.

Cultivators (License Types 1-4)

The MCRSA treats cultivator licensees differently based upon the size of their cultivation.  For simplicity purposes, we will refer to them as large, medium and small.  Here is how the MCRSA treats each respectively:

Large-Scale Cultivators (Types 3, 3A, and 3B):

For “large-scale” cultivators, the maximum allowable size for cultivation is 1-acre outdoors (Type 3) or 22,000 sq. ft. indoors (Types 3A and 3B).[2]   The Department of Food and Agriculture will be limiting the number of Type 3 licenses[3], though it is still unclear right now what that limit will be.

  • No Manufacturing License for Large-Scale Cultivators Unless Part of a Type 10A Dispensary:  Unlike smaller cultivators, it does not appear that Type 3 cultivators will be allowed to obtain manufacturing licenses (Types 6-7) at all.  However, Type 10A dispensaries could apply for both manufacturing and cultivation licenses, including Type 3, provided that their total cultivation area doesn't exceed 4 acres.[4]
  • May Hold a Transporter License: Type 3 cultivators may hold a Type 12 transporter license subject to certain restrictions.[5]

Medium-Scale Cultivators (Types 2, 2A, and 2B) and Small-Scale Cultivators (Types 1, 1A, and 1B):

For “medium-scale” cultivators, the maximum allowable size for cultivation is 10,000 sq. ft. both outdoors (Type 2) and indoors (Types 2A and 2B).[6]

For “small-scale” cultivators, the maximum allowable size for cultivation is 5,000 sq. ft. indoors (Types 1A and 1B) and 5,000 sq. ft. or up to 50 noncontiguous plants outdoors (Type 1).[7]

With respect to licensing restrictions, the MCRSA treats medium and small-scale cultivator licensees identically.

  • May Hold a Manufacturing License: Both Type 1 and 2 cultivators may hold either a Type 6 or 7 manufacturing license.[8]
  • May Hold a Transporter License: Both Type 1 and 2 cultivators may hold a Type 12 transporter license subject to certain restrictions.[9]
  • May Hold a Type 10A Dispensary License: Type 1, 1A, 1B, 2, 2A, or 2B licensees, or a combination thereof, may hold a Type 10A dispensary license.[10]

NOTE: If AB 2516 passes, a new cultivator license (Type 1C) will be added specifically for “micro farmers.”  This new license – dubbed the “specialty cottage” license – would allow small-time growers to cultivate up to 2,5000 sq. ft. using mixed light, or up to 25 plants outdoors, or up to 500 sq. ft. indoors.[11]

  • Cottage Cultivators Will Probably Be Treated Like Types 1 and 2: AB 2516 doesn't directly address the licensing restrictions for Type 1C cultivators, but it would be safe to assume that they would be treated identically to Type 1 and 2 cultivators (see above).

Nurseries (Type 4):

Type 4 nurseries can only cultivate “clones, immature plants, seeds, and other agricultural products used specifically for the planting, propagation, and cultivation of medical cannabis.”[12]

  • No Manufacturing License for Nurseries Unless Part of a Type 10A Dispensary: Like Type 3 cultivators, it does not appear that Type 4 nurseries will be allowed to obtain manufacturing licenses (Types 6-7) at all.  However, Type 10A dispensaries could apply for both manufacturing and cultivation licenses, including Type 4, provided that their total cultivation area doesn't exceed 4 acres.[13]
  • May Hold a Transporter License: Like the other cultivators, Type 4 nurseries may hold Type 12 transporter licenses subject to certain restrictions.[14]

Manufacturers (License Types 6 and 7)

For manufacturers, there will be two different types of licenses depending on whether you use volatile (Type 7) or non-volatile solvents (Type 6).  Like Type 3 licenses, the Department of Public Health will be limiting the number of licenses for manufacturers who use volatile solvents (Type 7) [15], but it is still unclear right now what that limit will be.

  • May Hold a Type 1 or 2 Cultivator License: Type 6 or 7 licensees, or a combination thereof, may also hold either a small or medium-scale cultivator license (Type 1, 1A, 1B, 2, 2A, or 2B).[16]
  • May Hold a Transporter License: Manufacturers may hold a Type 12 transporter license subject to certain restrictions.[17]  

Testing Laboratories (License Type 8):

Type 8 testing laboratories cannot hold any other type of license and are prohibited from having an ownership interest in any other licensee's entity or premises.[18]

Dispensaries (License Types 10 and 10A)

Under the MCRSA, there will be two types of licenses for dispensaries: Type 10 (general dispensary) and 10A (producing dispensary).

Type 10 licenses will be given for single, stand-alone retail dispensaries.  Type 10A licenses, on the other hand, will be given for what is called a “producing dispensary” – that is, a licensee that has no more than three individually licensed Type 10 dispensaries who wishes to hold either a cultivation or manufacturing license, or both.[19]

As you will see below, there is tons of opportunity for a Type 10A dispensary to maximize its licensing structure because Type 10A dispensaries can pretty much hold all the other types of licenses except Type 8 (laboratory testing) and Type 11 (distributor) licenses.

  • Type 10 Dispensaries Cannot Obtain Any Other License Unless Part of a Type 10A Dispensary – Grandfathering OK for Vertical Integration: Type 10 dispensaries cannot obtain any other type of license unless it is part of a Type 10A producing dispensary (see below).  However, if a Type 10 dispensary is in a local jurisdiction that requires vertical integration – i.e., all cultivation, manufacturing and distribution must be conducted by the dispensary  – then the Type 10 dispensary may continue to operate that way until January 1, 2026.[20]
  • Type 10A Dispensaries May Hold a Cultivator and Transporter License: Type 10A dispensaries may hold a Type 1 or 2 cultivator license, or a combination thereof.  If a Type 10A dispensary has a Type 1 or 2 cultivator license, then it may also hold a Type 12 transporter license subject to certain restrictions.[21]
  • Type 10A Dispensaries May Hold a Manufacturing and Transporter License: Type 10A dispensaries may hold a Type 6 or Type 7 manufacturing license, or a combination of both.   If a Type 10A dispensary has a manufacturing license, then it may also hold a Type 12 transporter license subject to certain restrictions.[22]
  • Type 10A Dispensaries May Hold a Manufacturing, Cultivator, and Transporter License: Type 10A dispensaries may hold a manufacturing license and any cultivator license (including Type 3!), or combination thereof, if their total cultivation area doesn't exceed 4 acres.[23]  By that same token, if a Type 10A dispensary has a manufacturing or cultivator license, then it may also hold a Type 12 transporter license subject to certain restrictions.[24]  This, however, will only last until January 1, 2016.[25]  After then, Type 10A dispensaries will no longer be able to have Type 3 licenses and they will not be able to simultaneously have both manufacturing and cultivation licenses.

Distributors (License Type 11)

Type 11 distributors must hold a Type 12 transporter license, but they cannot hold any other type of license.[26]  Type 11 distributors are prohibited from having an ownership interest in any other licensee's entity or premises, unless it is a security interest, lien or encumbrance on property that is being used by a licensee.[27]

Transporters (License Type 12)

Type 12 transporters only need to obtain licenses for each physical location where the Type 12 transporter conducts business while not in transport or where any transporting equipment (i.e., truck or car) permanently resides.[28]

  • May Hold a Distributor License: Type 12 transporters may hold a Type 11 distributor license, but it is not mandatory.[29]
  • Cultivators, Manufacturers and Type 10A Dispensaries May Transport: As already explained above, cultivators, manufacturers and Type 10A dispensaries may have Type 12 transporter licenses subject to certain restrictions.[30]

If the AUMA Passes in November …

If the Adult Use of Marijuana Act (“AUMA”) passes this coming November, this “roadmap” will obviously change.  Though the AUMA provides for 19 different types of licenses – most of which mirror the 17 licenses already created by the MCRSA – there will be several key differences with respect to licensing:

  • Vertical Integration: Unlike the MCRSA, the AUMA doesn't prohibit vertical integration of licenses.   Instead of being limited to only having up two different license types under the MCRSA, the AUMA instead allows a licensee to hold any number or combination of licenses: cultivator, manufacturer, retailer, distributor and tester.  There is one exception, however, for Type 5 cultivators (see below), who cannot hold certain other licenses.
  • New Category of Large Type 5 Cultivation Licenses: AUMA will create an additional category of Type 5 cultivation licenses, which will become the largest cultivation licenses available.  This license will be created for farms that exceed the MCRSA's current limit of 22,000 sq. ft. indoors or 1-acre outdoors.   No Type 5 licenses will be issued before January 1, 2023.[31]  Unlike other licensees, the vertical integration for Type 5 cultivators will be limited: they will not be allowed to hold Type 8 (laboratory tester), Type 11 (distributor) or Type 12 (microbusiness) licenses.
  • New Category of Type 12 “Microbusiness” Licenses: Apparently dispelling with MCRSA's transporter category, the AUMA will replace Type 12 licenses with a new category of “microbusiness” licenses.  This license will allow for vertically integrated small farm operations not exceeding 10,000 sq. ft. – much like the collective model we've already been using here in California.
  • Less Business Potential for Type 11 Distributors: Unlike the MMRSA, the AUMA doesn't require that cultivators send their products to Type 11 distributors.  It appears that only the new, Type 5 large-scale cultivators will be required to use Type 11 distributors.  The remaining licensees will be eligibly to distribute for themselves.
  • Cannabis Cafés:  The AUMA will allow local governments to permit on-site consumption for Type 10 dispensaries and Type 12 microbusinesses in their jurisdiction provided that the sale or consumption of alcohol or tobacco is not allowed on the premises.


[1] SB 837, § 30.

[2] SB 837, § 30.

[3] AB 243, 19332(g).

[4] SB 837, § 30.

[5] SB 837, § 30.

[6] SB 837, § 30.

[7] SB 837, § 30.

[8] SB 837, § 30.

[9] SB 837, § 30.

[10] SB 837, § 30.

[11] AB 2516, § 1.

[12] SB 837, § 6.

[13] SB 837, § 30.

[14] SB 837, §§ 30, 32.

[15] AB 243, 19332(g).

[16] SB 837, § 30.

[17] SB 837, § 30.

[18] SB 837, § 35.

[19] SB 837, § 35.

[20] SB 837, § 30.

[21] SB 837, §§ 28, 30.

[22] SB 837, §§ 28, 30.

[23] SB 837, § 30.

[24] SB 837, §§ 28, 30.

[25] SB 837, § 30.

[26] SB 837, § 30.

[27] SB 837, § 35

[28] SB 837, § 23.

[29] SB 837, § 30.

[30] SB 837, §§ 28, 30.

[31] AUMA, § 26062(d).

About the Author

Meital Manzuri, Esq.

Managing Partner.

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