San Francisco May Consider Freezing Cannabis Licensing

City officials in San Francisco could consider a freeze on new cannabis permits amid plummeting sales at individual dispensaries and a flourishing unregulated marketplace.

Full story after the jump.

While cannabis sales in San Francisco have increased since statewide legalization in 2018, the number of licensed dispensaries has also increased and their average individual sales are shrinking. As a result, officials may consider a freeze on cannabis licensing in the city, the SFist reports.

Despite San Francisco’s increasing rate of cannabis sales, businesses are not benefiting — and there are currently 133 pending applications for new dispensaries, including some social equity applicants.

“You can think of it as the pie getting bigger, but the average slices getting smaller,” Jeff Pomrenke, a controller’s office analyst, told the SF Chronicle. Specifically, individual dispensary sales have dropped on average from $6.3 million to $3.4 million, likely due to the influx of new dispensaries.

When California voters opted to legalize adult-use cannabis in 2016, business owners and advocates warned against burdensome regulations and high taxes but officials went on to install one of the strictest and most heavily taxed state-legal cannabis marketplaces. Today, despite having legalized, the state’s unregulated market continues to flourish, particularly in cities where cannabis prices are driven up by additional regulations, local taxes, and high costs of living.

“San Francisco’s retail cannabis industry is still in its infancy, but it’s clearly facing some growing pains,” said city Supervisor Rafael Mandelman.

“Regulatory requirements are tough for small businesses generally, and the additional burdens placed on cannabis businesses are particularly challenging. As policymakers, we clearly need to work with equity applicants, industry stakeholders and the Office of Cannabis to shorten permit approval timelines and address market oversaturation.” — San Francisco Supervisor Rafael Mandelman, via the SF Chronicle

According to a 2019 audit by the United Cannabis Business Association, there were some 2,835 unlicensed dispensaries and delivery services in California and just 873 licensees.

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