Does Medical Licensing Make Sense in Recreational Jurisdictions?

By Griffen Thorne, Attorney at Harris Bricken

Cannabis licensing has a pretty standard trajectory by this point in time. States tend to start out with medical programs and later adopt recreational programs. What usually happens is that the recreational cannabis market swallows up the medical market. The majority of medical operators will seek out and get authorization to sell recreational cannabis, and many if not most customers will be recreational customers.

The reasons for this are pretty obvious but it bears noting. There is a much bigger consumer push towards the recreational market given that it’s a whole lot easier for a customer to just pull out their ID than it is to get a doctor’s recommendation. So even a lot of people who may have been traditional medical customers will end up just going the easy route and buy recreational cannabis.

So with all this in mind, it bears asking, why is medical cannabis licensing even still a thing?

On one hand, medical cannabis actually makes a lot of sense from a customer’s point of view. Where I practice in California, there are numerous benefits for medical customers:

Recreational cannabis can only be sold to people over age 21. Medical cannabis doesn’t have the same age barriers. So people under 21 with qualifying conditions and a medical rec/card may be able to access cannabis. The daily purchase limits for medical customers is substantially higher than it is for recreational customers. Medical products can have a much higher THC concentration. Medical card-holding customers get a break on certain taxes.

This list isn’t exclusive, but without a doubt, there are still many benefits for medical patients that haven’t been eclipsed by the adult-use market.

So from the customer’s point of view, the answer to my question that is the title of this post is a clear “yes”.

Looking at the business side, we can get a pretty different answer. When California’s state licensing program opened up a few years ago, there was a lot more of a difference between the two programs. But over the years, regulations were adopted that allow people with a medical designation, for example, to do business with a recreational licensee. This translates to, for example, allowing a medical cultivator to sell its cannabis to a recreational distributor.

Things get hairy though when you start to look at how local jurisdictions in California regulate medical and recreational cannabis. There are still a huge number of cities that only allow medical sales in which this isn’t an issue, but problems about in cities that previously allowed medical licensing and pivoted to allowing recreational sales.

What we’ve seen happen numerous times is that cities with legacy medical programs adopt recreational cannabis licensing with very different – and in some cases, very contradictory – rules. This means that a single licensee at a single facility may be subject to different rules at the same facility. I won’t call out any specific cities in this post, but there are a few I can think of right off the bat where this is a huge problem.

On top of this, dual local licensing can also mean double the licensing fees for cannabis businesses. I don’t need to explain why that’s not any good.

So to circle back to my question about whether medical licensing is still worth it, from a licensee’s perspective, the answer is in many cases “no” – at least in cities that allow recreational cannabis. Theoretically, a good solution would be to just merge recreational and medical licensing but to allow medical consumer benefits to stay as they are. The problem is that our state licensing scheme and many local laws are based on voter initiatives which are notoriously difficult to change. For now, we’re stuck with a system that’s difficult to navigate, expensive, and intensely bureaucratic, like so much in California.