Nearly 400 California cannabis companies had their licenses to operate suspended by regulators on Friday, pending the firms’ enrollment in a system designed to track the supply of marijuana products in the state. The action by the California Bureau of Cannabis Control has affected a total of 394 cannabis distributors, retailers, delivery services, and microbusinesses.

Under provisions of Prop 64, the 2016 voter initiative that legalized recreational marijuana in California, businesses licensed to operate in the state’s legal cannabis market must participate in a track-and-trace system to prevent the diversion of products to the illicit market. State regulators have selected tracking software provided by Metrc, a company based in Lakeland, Florida that provides its services to 11 other states with legal cannabis.

California cannabis businesses are currently transitioning from temporary licenses, which expired during the summer, to provisional licenses, the next step in the process of obtaining a permanent annual operating permit. As companies qualified for their provisional licenses, they were given five days to enroll in Metrc, complete required training, and begin uploading inventory data to the track-and-trace system.

Approximately three months ago, the BCC reminded the companies that had been awarded provisional licenses but not enrolled in Metrc of their requirement to do so. In October, the firms that had still not complied were notified that their license would be suspended on November 1 if they had still not begun using the system. On Friday, regulators suspended the licenses of the 394 companies, telling them they could not legally operate until they had enrolled in Metrc.

‘Growing Pains’ of Regulation

BCC spokesman Alex Traverso attributed the suspensions to the difficulties inherent in transitioning to a regulated cannabis market.

“These are growing pains,” he said. “I think we knew it was going to be a process and it was going to take some time, and that it was going to be an adjustment period for a lot of people who have been doing things one way for some time now.”

Traverso added that 80 businesses had enrolled in Metrc on the day the suspensions were issued and that their licenses would be restored soon. By Wednesday, the number of suspended licenses had dropped to 385, including 63 retailers, 61 delivery services, 47 microbusinesses, 185 distributors, and 29 transporters.

“It’s relatively simple to get your license out of suspension,” Traverso said.

But cannabis business attorney Jessica McElfresh of San Diego-based firm McElfresh Law told High Times that it’s not that easy. She says that one of her clients who has enrolled in Metrc and received credentials has had their license suspended. McElfresh’s attempts to contact the BCC to address the issue have been unsuccessful, with their phone system apparently overwhelmed and emails so far unanswered. The rollout of Metrc, she says, has been fraught with problems.

“I appreciate the state is frustrated that some people are dragging their feet on Metrc,” said McElfresh in a telephone interview. “I really do. In fact, I have clients who are in Metrc who are frustrated by the fact, because it causes a lot of extra work for them. I don’t appreciate having to undo suspensions that shouldn’t have been issued.”

Luckily, she added, the client is not operating at this time so the suspension is not interrupting business.

“For them, it’s just more of an annoying hassle,” said McElfresh.

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