So, can I vertically integrate?

Yes. But with limits. The legislature took a decidedly cautious approach on vertical integration.

A licensee may only hold a state license in up to two separate license categories, as follows:

Type 1, 1A, 1B, 2, 2A, or 2B licensees may also hold either a Type 6 or 7 state license.

Type 6 or 7 licensees, or a combination thereof, may also hold either a Type 1, 1A, 1B, 2, 2A, or 2B state license.

Type 6 or 7 licensees, or a combination thereof, may also hold a Type 10A state license.

Type 10A licensees may also hold either a Type 6 or 7 state licenses, or a combination thereof.

Type 1, 1A, 1B, 2, 2A, or 2B licensees, or a combination thereof, May also hold a Type 10A state license.

Type 10A licensees may apply for Type 1, 1A, 1B, 2, 2A, or 2B state license, or a combination thereof.

Type 11 licensees shall apply for a Type 12 state license, but shall not apply for any other type of state licenses

A Type 10A licensee may apply for a Type 6 or 7 state license and hold a 1, 1A, 1B, 2, 2A, 2B, 3, 3A, 3B, 4 or combination thereof if, under the 1, 1A, 1B, 2, 2A, 2B, 3, 3A, 3B, 4 or combination of licenses thereof, no more than four acres of total canopy size of cultivation by the licensee is occurring throughout the state during the period that the respective licenses are valid.

All cultivation pursuant to this section shall comply with local ordinances. This paragraph shall become inoperative on January 1, 2026.

What's up with vertical integration?

Regulations limiting or authorizing vertical integration are an important feature of any regulated cannabis marketplace.

In California, the Blue Ribbon Commission “and many of the individuals it consulted had significant reservations about the other end of the continuum, namely a market dominated by large corporations that could exert increasing influence on the commercial and political process.”

The Commission determined that “it is appropriate and probably wise for the state of California to adopt a path that limits the size and power—both economic and political—of any one entity in the marijuana industry.”

Further, the report went on to say that “In addition to limiting the scale of operations, it may be appropriate for the state to set limits on vertical integration.”

What license types were created?

Cultivation licenses:

  • Type 1 = Cultivation; Specialty outdoor;
  • Type 1A = Cultivation; Specialty indoor;
  • Type 1B = Cultivation; Specialty mixed-light;
  • Type 2 = Cultivation; Outdoor; Small.
  • Type 2A = Cultivation; Indoor; Small.
  • Type 2B = Cultivation; Mixed-light; Small.
  • Type 3 = Cultivation; Outdoor; Medium.
  • Type 3A = Cultivation; Indoor; Medium.
  • Type 3B = Cultivation; Mixed-light; Medium.
  • Type 4 = Cultivation; Nursery.

Other licenses:

  • Type 6 = Manufacturer 1.
  • Type 7 = Manufacturer 2.
  • Type 10A = Dispensary; No more than three retail sites.

Stand Alone License Types

  • Type 8 = Testing.
  • Type 11 = Distribution.
  • Type 10 = Dispensary; General.
  • Type 12 = Transporter.