The Los Angeles Department of Cannabis Regulation (DCR) has announced plans to audit the city’s latest social equity licensing round amid concerns that the process was flawed, but an industry organization has formed to speak out against a potential licensing redo.

The Social Equity Alliance was created to provide a voice for the 100 social equity applicants who were awarded licenses during the city’s first-come, first-served process that took place in early September.

The competitive application process opened at 10 a.m. the morning of Sept. 3, and roughly 800 business owners applied for cannabis retail licenses, which were to be awarded to the first 100 qualified applicants.

“It was really just a race on the morning of Sept. 3 to submit applications, and 800 people submitted, though only 100 people were eligible,” Jillian Goldsmith, spokesperson for the Social Equity Alliance, tells Cannabis Business Times. “Basically, there are … 700-plus people who are pretty upset that they didn’t get selected for this licensing process—not only the social equity applicants, but also their funders and their backers.”

City Council President Herb Wesson called for the suspension of the city’s licensing process in late October, alleging that the process had been compromised by some applicants receiving early access to the online application system. Wesson drafted a letter to the DCR to urge the agency to stop processing applications for the new cannabis retail licenses and to conduct an independent audit of the process before proceeding. Wesson also suggested that the agency should process every application—not just the first 100 received—as another way to ensure fairness in the process.

DCR Executive Director Cat Packer has indicated that while two applicants did indeed gain early access to the online application system due to a staff error that occurred while resetting their passwords, those applicants were pushed back in line to where they would have been if they had accessed the system when it opened at 10 a.m.

“They’ve fixed the problem, but everyone kind of latched on to that and is using that to say that all of these people that got in for processing for this licensing round, they all cheated,” Goldsmith says.

Los Angeles Mayor Eric Garcetti called for a third-party audit of the licensing process in early November, and Packer announced Nov. 18 that the agency will not issue the final cannabis dispensary licenses until the review is completed.

“[The] Social Equity Alliance came together to be a voice for the people that were selected for further licensing in this round because there were so many people making so many accusations against them and trying to push different agendas,” Goldsmith says.

While applicants not selected for further processing in this licensing round are pushing for all 800-plus applications to be reviewed, Goldsmith says the DCR is understaffed as it is and would likely not have the manpower to process that many applications within a reasonable timeframe.

“Even though they’ve gotten some more staff and they’ve gotten some more funding, they’re still really understaffed and underfunded for the scale of what it is that they have to process,” Goldsmith says. “So, if they were to open up the process to all the applicants instead of the 100 that they were supposed to do, the process would stretch on forever.”

In addition, there are already over 200 licensed cannabis dispensaries in Los Angeles, and potentially adding another 800 would cause supply to outweigh demand in the city, she adds.

“Everyone is competing against other shops, and they’re also still competing against the black market, which is booming in Los Angeles right now,” Goldsmith says.

The Social Equity Alliance has received word from Wesson’s office that the audit should be completed next month, but Goldsmith fears the process will take much longer, and the social equity applicants cannot afford to wait.

“[The applicants] are against the odds, holding on to locations for their shops indefinitely while they wait to get licensing and open,” she says. “It’s going to put a lot of them out of business before they even start their businesses.”

The Social Equity Alliance has drafted its own open letter in order to address some of the accusations against the licensing process.

“All these people were verified and vetted by the city,” Goldsmith says. “They’re verified social equity applicants, meaning that they’ve proven that they are low-income, that they were impacted by the war on drugs, that they have cannabis convictions [or] that they reside in an area that was persecuted by the war on drugs. So, the bottom line is, the people who weren’t selected for this round are just trying to come up with reasons to get their licenses processed anyway.”

And, she emphasizes, the longer the licensing process continues, the more harm it causes the very people that the program was supposed to help.

“The social equity program in Los Angeles was created to allow low-income individuals who have been impacted by the war on drugs in the past to be able to turn their lives around and start businesses in an emerging industry, … and every delay that happens in the licensing causes more and more of these people to basically run out of funding, run out of time [and] lose their premises that some of them are paying monthly leases on, even though they’re not able to open their doors and start making money,” Goldsmith says. “Basically, the more the process drags on, the more the people who the program was created to help are hurt and are pushed out of the process."