Council committee approves pause on 2025 cannabis license lottery, directs fee study and limited exemptions for equity applicants

The Los Angeles City Council9Committee on Government Operations on June 3 approved a motion to pause the Department of Cannabis Regulation9(DCR) license lottery planned for 2025 and directed staff to pursue a multi-part review of proposed fee increases and related policy issues.

The instruction package, introduced by Councilmember Padilla and approved by the committee, asks the City Administrative Officer to commission a three-part independent study of DCR cost-recovery fees and tax impacts; directs DCR to produce a follow-up report on application processing times and enforcement revenues; and asks the City Attorney to prepare ordinance language to amend city code provisions related to DCR fee and process changes. The committee also approved a three-year exemption from the proposed fee increases for applicants under the city99s social-equity program.

Why it matters: Committee members and dozens of public commenters said the local cannabis industry is struggling under current fees, heavy taxation and a proliferation of unlicensed sellers. Committee members framed the pause and the directed studies as steps to better align fees with actual department costs, examine possible subsidies or temporary mitigation and ensure equity applicants are not unduly penalized while the city refines licensing processes.

DCR Assistant Director Jason Kleen and a returning DCR official identified in the meeting as Michelle (COO/liaison) outlined operational and legal constraints. Kleen said the department is legally structured as a cost-recovery operation and does not receive general-fund support. He described a licensing system that has grown to roughly 1,400 active licenses and said that some licensees hold a license but cannot operate because they lack approvals from other city agencies.

Kleen said applications that are otherwise complete may still be blocked by separate approvals (occupancy, fire, land-use), leaving about "approximately 200 businesses that have a physical license and could operate if they obtained other agencies' approvals." He urged a holistic alignment among departments to shorten timelines.

Public commenters representing licensed operators urged an immediate pause to further license rounds and sharp reductions in taxes and fees. Alexis Luna Reyes, owner-operator of JC Red (district 14), said: "Antes de expandir el programa, la ciudad tiene que asegurar que los operadores actuales estén estables, apoyados y tengan la oportunidad para tener éxito." Ethan Martin of Cherry Cannabis Cove and Elliot Lewis of Cannabis Co Catalyst urged "radical" changes rather than repeated studies; Lewis told the committee he wanted "héroes" to act on behalf of the existing regulated market.

Financial context provided in the presentation: DCR expects the legal cannabis market to need roughly $140 million in tax revenue to meet budget assumptions; current collections were estimated at about $80 million, leaving an indicated shortfall of roughly $60 million. The department described a fee and tax structure that includes a city cannabis tax (15% baseline) that, under current rules described by DCR staff, would automatically increase to 19% on July 1, 2025 if specified revenue targets are not met. DCR staff said they had approximately $3.5 million in one-time grant or contingency funds available for 2025-26 that could be used to mitigate near-term impacts.

Committee instructions and next steps: The approved package instructs that fee increases be reviewed with a clause creating a three-year exemption from the proposed increases for social-equity applicants; that the CAO contract an independent three-part review (cost recovery, fee-setting methodology and tax-impact analysis) with DCR consultation; and that DCR produce a follow-up report including: processing-time data (received-to-complete timestamps), the department9s enforcement and fines history for the past five years, and a description of the tools DCR uses to coordinate with other city departments. The City Attorney was asked to prepare ordinance language to implement necessary municipal-code changes.

Voting and motion details: The committee approved the modified motion as presented. Committee roll calls recorded three affirmative votes.

Background and context: The committee revisited the matter after several prior hearings (April 23, May 6 and May 20, 2025) and extensive public comment. DCR staff traced several longstanding problems to the department9s start-up years (2013 launch and 2019 expansion), including limited initial staffing and underfunded equity services. Staff said changes made after 2019 (pre-application review, revised timelines and a 2019992019-to-2022 shift in processes) were intended to address earlier problems but that substantial operational and market changes have continued to stress the system.

What the committee did not decide: The committee did not set final fee rates or permanently change the city cannabis tax; it instead paused a next-round lottery and directed further study and reporting before ordinance introduction. The committee also did not authorize general-fund subsidies for ongoing fee relief; staff indicated that any sustained subsidy would require general-fund coverage and separate council action.

"We want to be methodical," Padilla said while reading the motion's instructions; public commenters, industry representatives and DCR staff agreed the pause would provide time to align processes and evaluate the fiscal trade-offs.

Votes at a glance for this item: motion approved (vote recorded as three yes votes).