California Takes Lead On Dual Licensure Of Cannabis, Gaming Businesses

October 10, 2022
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With the approval of several recommendations to allow for dual licensure of the cardroom and cannabis businesses, California policymakers are ushering in a new era for both industries as the federal government still considers marijuana sales and possession a crime.

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With the approval of several recommendations to allow for dual licensure of the cardroom and cannabis businesses, California policymakers are ushering in a new era for both industries as the federal government still considers marijuana sales and possession a crime.

The Gaming Policy Advisory Committee (GPAC) last week unanimously approved forwarding a memorandum with three recommendations for dual licensure to the California Gambling Control Commission (CGCC) for final approval.

Among GPAC’s recommendations was requiring applicants and licensees to provide financial account information for their cannabis businesses with initial and renewal applications.

Stacey Luna Baxter, the CGCC’s executive director who oversees GPAC meetings, said the committee also approved recommending regulators consider, when appropriate, whether the failure of a licensee or applicant to obtain and maintain a separate bank account for a cannabis business is grounds for license denial, conditions or revocation.

Finally, policymakers recommended verification of financial account information on the licensee status as part of the Bureau of Gambling Control’s (BGC) investigation and, if necessary, a memorandum of understanding between the BGC and the state's Department of Cannabis Control for any information sharing on dual licenses.

“We hope it strikes a good balance between the multiple factors we are trying to deal with,” said David Fried, a gaming attorney in San Francisco and GPAC member.

Fried reminded his colleagues that “cannabis businesses are perfectly legal under California law if they are licensed and regulated,” although they face restrictions under federal law, especially regarding financial transactions.

“The original request … was to come up with some ideas of how to address the need that funds need to be separate in some circumstances,” he said.

Federal law deems cannabis to be a Schedule 1 illegal drug under the Controlled Substances Act, putting it on par with heroin.

That designation could change in the future after President Joe Biden on Thursday (October 6) called on the U.S. Secretary of Health and Human Services and the attorney general to “expeditiously” review how cannabis is scheduled under law.

The BGC, which is a division of the California attorney general’s office, has expressed concern about the laundering of cannabis funds through a cardroom’s cage.

BGC director Yolanda Morrow participated in Wednesday’s (October 5) meeting but did not comment on whether the recommendations eased the agency’s concerns.

Baxter mentioned that the memo did read that these “recommendations do not require regulations,” but questioned whether that was accurate because they were “requiring specific actions of a specific set of licensees.”

Fried, who worked on crafting the recommendations with Jieho Lee, Knighted Ventures managing partner, said he would defer to CGCC staff to answer that question.

Fried said he believed commissioners already had the authority to impose conditions on licensees.

Prior to adopting the memorandum, the nine-member committee deleted a previously drafted section that said the recommendations did not require regulations, allowing the CGCC to consider the need for rules to govern dual licensure.

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