Aiming to impose a sweeping set of statewide regulations on the marijuana industry, California passed a law last year to license shops that provide medical cannabis.
But starting in two years, marijuana shops won't be able to get those state licenses unless they also have permission from local government -- and in Los Angeles, that could leave them in the lurch.
Three years ago, Los Angeles city voters passed Proposition D, which allows some marijuana businesses to avoid being prosecuted if they meet a list of requirements, including having registered with the city in the past and operating an adequate distance from parks and schools.
But the rules don't provide any kind of local license or permit to authorize marijuana shops.
Even if shops are in line with Proposition D, "we're not licensed," said Yamileth Bolaños, president of the Greater Los Angeles Collective Alliance. "And if we don't get licensed, we won't be able to stay open."
Such local restrictions could undermine the promise of the state law, said Aaron Herzberg, a partner at CalCann Holdings Inc., which invests in California medical marijuana businesses.
"You can agree Sacramento is going to regulate this, but if every city says, 'No, no, no -- we're not going to do this,' it's kind of a meaningless law," Herzberg said.
To smooth the way for local cannabis shops to get state approval, Bolaños said her group wants to ask voters to approve a new measure this fall, one that would create a city system for permitting marijuana businesses. Bolaños said her group plans to submit their proposed measure by the end of the week.
If L.A. doesn't create a permitting system, its businesses won't be able to take part in the state system, said Nate Bradley, executive director of the California Cannabis Industry Assn.
"They're going to have to do it," Bradley said.
But if Bolaños and her group succeed in getting its measure onto the fall ballot, it will probably kick off a new battle over how L.A. should regulate medical marijuana -- one bound to divide marijuana shops themselves.
While some groups will seek to continue capping the number of pot shops allowed in the city, including GLACA, others will push hard against such restrictions. "That is going to be the big fight," Bradley said.
Bolaños said the ballot measure would also allow delivery of marijuana from brick-and-mortar shops that comply with the Proposition D rules. City Atty. Mike Feuer has argued that Proposition D bars any kind of medical marijuana delivery except if it comes directly from the primary caregiver.
If it garners enough signatures, the local initiative could be on the ballot at the same time as a potential statewide measure to legalize recreational marijuana.
Since Proposition D was passed, Feuer says the city has shut down hundreds of medical marijuana shops that violate the local rules. When the law was passed, city officials estimated fewer than 140 pot shops would meet those requirements and be able to stay in business citywide.
Yet hundreds more – 447 marijuana businesses – renewed their registrations to pay L.A. business taxes last year and got registration certificates from the city.
Finance officials say they aren't authorized to examine whether a business is legal when it registers to pay taxes. But the phenomenon has frustrated lawmakers, who say the city shouldn't be reaping money from some of the same businesses that it is trying to shut down.
Critics have also complained that pot shops that flout the city rules have used the tax certificates to dupe customers into believing that they are operating with municipal approval, even though the tax documents are not a permit.
To stop that from happening, a City Council committee voted Monday to stop registering new marijuana shops to pay city taxes, since newly opened shops would not be able to meet the Proposition D requirements.
Under the proposal, existing marijuana shops would have to attest in writing that they follow the rules of Proposition D when they renew their tax registration. Lying about it would be a misdemeanor.
The proposed rules would also make it illegal for pot shops to display an expired tax registration certificate or one in a different business category to mislead the public -- two ways that lawmakers feared that marijuana businesses that do not meet the city requirements could try to avoid the rules.
The proposal now heads to the entire council for its approval.