The situation in California is substantially worse than most people are aware. Many of the large well-funded operations have also been severely disrupted since adult use legalization. Most of the blame belongs to the CA bureaucracy which has completely bungled the rollout of legalization.

CA took so long to issue annual licenses that many cannabis businesses' temporary licenses were going to expire before they received annual licenses, and the state's own authority to issue temporary licenses was going to expire before they could fix the situation (July 1). The result would be that the vast majority of the state's legal cannabis businesses were at risk of finding themselves without a license.

To fix this, the state regulators had to petition the legislators to pass an emergency resolution giving them the authority to issue a "provisional" license, which is basically a mix of a temporary and an annual license (including all of the track-and-trace requirements of a full annual license). Yet even after doing this, the state failed to issue provisional licenses for a huge fraction before July 1. Even as of today, many businesses which were operating in full compliance and with every intention of following the rules are operating without a valid license due to this gap, though I think the state has finally almost finished issuing provisionals.

Another major aspect of this is that as each licensee gets their provisional license, they must begin tracking all of their inventory operations on the state's cannabis track-and-trace system, powered by Metrc. The state is woefully unprepared to train licensees about all of the requirements of this system, and there are gaps between what the rules say and what the system actually allows you to do. Third party software providers that integrate with Metrc (like us, Distru) are also in the dark on much of this, because Metrc has only minimal documentation, is full of bugs, and doesn't offer a complete sandbox/test environment. The only way to really figure out some aspects of the system is through trial and error with live customers. We're much further along on this than most (this was my 3rd implementation of a Metrc sync engine so it's robust enough to deal with many of their issues); but there are still edge cases that are impossible to handle well.

When there is a major bug in their software (such as the GET endpoints for transfers straight up not working when they should) Metrc does not fix the problem. When there are gaps between the regulations and Metrc, Metrc won't answer and says to "talk to the state". The state won't answer (likely because they don't know) and sometimes says "talk to Metrc". We're doing our best to help our customers and train them on things the state isn't prepared to just so our customers can keep operating, but the unfortunate reality is that our hands are often tied.

The above is just a glimpse, but there are so many more issues. Banking is of course a huge problem until congress acts to fix it. Operators often have to pay their taxes by driving giant bags of cash to one of the few state offices, or to an authorized bank branch. One of our customers brought their giant bag of cash to pay their taxes directly into the state's bank account at Bank of America, and the bank's fraud systems shut down the state's bank account temporarily as a result. Add to this the regulatory variations at the local levels where most cities and counties are still outlawing the industry, and the absurdly high taxes some are trying to impose, and it's no surprise that things are going so poorly.

California could have followed the proven playbooks that other much smaller states had successfully used to roll out their regulated industry; instead we are almost 3 years into the adult use era and it is still a complete shit show.

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Obligatory footnote: Distru is doing well in spite of this environment and we're confident we will help our customers through it. All of the above is really an opportunity, and we've been building out a world class team to help solve these supply chain problems. If you find this industry as fascinating as I do, and want to work on software that makes a huge impact on the industry, please reach out :) blake [at] distru or https://www.distru.com/careers