Public events that allow the on-site sale of cannabis products present a huge financial opportunity for cannabis businesses. As an example, Outside Lands, the annual music festival held in San Francisco, sold seven figures worth of cannabis products in just three days. With the legalization of cannabis, and adoption of local regulations and similar pilot programs authorizing such special event sales, we expect to see similar numbers at other public events. Below, we lay out how you can sell cannabis products at events, and the various steps of the licensing process.
The California Bureau of Cannabis Control (the “BCC”) implemented a non-statutory license scheme to provide the legal framework of the cannabis event sales license. This license allows for the on-site sale and consumption of cannabis products at public events. Following the implementation of the BCC regulations, several local jurisdictions, including San Francisco, introduced pilot programs within the framework that the BCC set forth. Important to note at outset, informational or educational cannabis events where no cannabis goods are sold or consumed are not required to obtain a temporary cannabis event license.
State Licensing Process
The BCC requires that every public event that allows for the on-site sale of cannabis be licensed. Therefore, if your event is open to the public, or you are selling tickets publicly, you need to get licensed. However, if you have a private party that is not open to the public, you do not need to get licensed.
Next, you must obtain an annual cannabis event organizer license. The annual cannabis event organizer license must pay a fee based on the number of events organized by the licensee per year. As you are applying for the annual license, you should be aware that you are not only required to disclose personal information, but information of your cannabis business. Specifically, you are required to list all of the owners (anyone who owns more than 20%) of your cannabis business, and anyone else who is deemed to be a financial interest holder. In addition, the BCC requires you to sign the application under penalty of perjury. Therefore, it is vital that you are forthcoming in your application, otherwise you could not only jeopardize your application for the annual event sales license, but also other possible active licenses you may hold. The application fee for the annual even license is $1,000 along with the required annual license fee you must pay depending on how many events you are planning to host in a given year. The annual license fee ranges from $3,000 for up to three events to $20,000 for organizers planning to host more than 20 events in one year.
Once you secured your annual event license, you need to apply the for the temporary cannabis event license for each individual event where you would like to allow the sale of cannabis products. The application fee for this license is also $1,000 and you may get this license for up to four days. In addition to disclosing certain personal information, you also have to attach the following documents to the application:
You must submit your application at least 60 days prior to the event. However, if you prefer to avoid last minute annoyances, you might consider submitting the application even earlier. As a reference, the BCC approved the license for Outside Lands only 67 hours before the festival started. Therefore, it is important to plan far ahead and submit your application with plenty of lead time in case the regulators have comments or concerns about your application.
As you are navigating through the licensing process laid out above, it is essential to pay attention to the following in order to avoid issues with state and local regulators.
First, while the cannabis event sales license is state-wide, local jurisdictions are free to allow it or not. For example, San Francisco implemented its pilot program just earlier this year. We expect that San Francisco, and other cities, will eventually introduce permanent programs. Regardless, when you apply for this license, you need to consult local regulations which will likely have a myriad of complex and financially burdensome permitting requirements.
Second, an event sales license does not give you the ability to cultivate, distribute, package, transport, or even sell cannabis. It only gives you the license to hold a public cannabis event. In order to distribute, package, transport, and sell cannabis products you either need to get the proper licenses, or you need to hire third-party vendors who have the appropriate licenses. If you do decide to hire third-party vendors, keep in mind that the BCC requires you to disclose all licensees and employees that will be selling cannabis on-site. Importantly, payment to a cannabis event organizer may not be determined based on, or tied to, the sale of cannabis goods.
Third, you must ensure that the cannabis products adhere to retailer requirements pertaining to displays, exit packaging, customer returns, daily sales limits, and free samples. If you are using third-party vendors, it would be wise to have the vendors sign well thought out contracts obligating them to adhere to the various license and event requirements, among other things. This is crucial because you will have less ability to control the environment and risks, especially at a larger scale event. Specialized contract provisions regarding adhering to the regulations, indemnity, liability issues and insurance coverage protections are essential. It is important to work with an attorney with the skill and knowledge in this very specialized and fast moving area. While opportunity abounds, it will be very important to obtain special insurance coverage for the complexities and risks inherent at a public event offering cannabis for sale.
Lastly, with the cannabis event sales license, you must sell only within the approved area and only to those 21 years old or older. Sales through use of a mobile cart or similar means are prohibited. You will not be able to sell alcohol within the cannabis goods sales and consumption area either. Alcohol must only be sold at a separately licensed area.
After Outside Lands, it is clear that an event where you can sell cannabis products on-site can be a great marketing event giving you the ability to reach your consumers in a completely different way. However, before you are allowed to have such an event, you must navigate an extensive, and sometimes burdensome, process that varies from jurisdiction to jurisdiction. If you need help in navigating the various requirements, we suggest you contact a legal counsel who can help you maneuver the various legal and permitting requirements.
Jonathan Storper leads Hanson Bridgett’s cannabis and regenerative business law practices, and since California’s legalization of marijuana has worked with cannabis companies and their investors in connection with business transactions, including formation, local and state licensing, finance, contracts, licenses, joint venture and development, mergers and acquisitions, licensing, e-commerce, technology-related matters and general corporate law.
Storper has recently represented several cannabis companies in financing and M&A transactions that include publicly traded companies from Canada. He also represents companies in a variety of industries and many non-profit charities, foundations, and business associations.
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