Regulatory Compliance
Experienced Regulatory Counsel
Licensing and day‑to‑day compliance remain the backbone of any cannabis or hemp business in California. The firm advises operators, investors, and landlords on every phase of the regulatory lifecycle, from local permitting and state licensing to renewals, inspections, ownership changes, and enforcement.
Work highlights include guiding buyers and sellers through change‑of‑control and license‑transfer processes in connection with acquisitions of manufacturing, distribution, cultivation, and retail businesses across the state. In large distressed scenarios, the practice has worked within receivership and restructuring processes to secure payments and regulatory approvals before control shifts, often coordinating among company personnel, lenders, and court‑appointed fiduciaries.
The firm also counsels online hemp and cannabinoid businesses and multi‑state operators on emerging state‑level rules governing e‑commerce platforms, delivery, and cross‑border sales, including direct legislative engagement and testimony before state lawmakers on bills affecting the online marketplace. For social‑equity licensees and equity retailers, it aligns compliance strategies with program‑specific obligations and community‑benefit commitments.
The Law Office of Shay Aaron Gilmore has successfully guided clients through local and state licensing applications, procuring or maintaining dozens of local and state licenses. Shay provides legal support for licensure and regulatory compliance for cannabis retailers, distributors, cultivators, manufacturers, and testing labs, as well as industrial hemp cultivators, in California.
What Compliance Issues Do Cannabis Businesses Face?
From Shay’s interview for the Master’s series on ReelLawyers.com
The kinds of compliance issues I see my clients in the cannabis and hemp industries facing include product testing and quality control, employee and labor matters, as well as security and inventory control.
Operating within a system of conflicting federal, state, and local rules, cannabis and hemp companies have their work cut out for them when it comes to compliance. The Law Office of Shay Aaron Gilmore is ideally situated to guide clients through the ever-changing application process and regulatory landscape in California, no matter the local jurisdiction. We provide a variety of services for cannabis and hemp regulatory compliance in California, including the following:
- Agency audits and communications
- Commercial cannabis local and state authorizations
- Data privacy
- Environmental concerns
- Product warnings, labeling, packaging
- Prop 65 advice and counsel
Ownership and Financial Interest Changes Under DCC Rules
Changes to ownership or control of a licensed cannabis business trigger some of the most sensitive regulatory reviews in California. Under California Code of Regulations, title 4, section 15003, “owners” include not only persons with 20% or more aggregate ownership, but also individuals who manage, direct, or control the operations of the commercial cannabis business. Section 15004 defines “financial interest holders” broadly to capture many investors, lenders, and profit‑participants who must be disclosed even if they are not owners. Routine events—such as bringing in a new investor, redeeming a member, restructuring profit‑sharing, or granting equity‑based compensation—can therefore create ownership or financial‑interest changes that must be reported to the DCC and, often, to local licensing agencies. The firm works with clients to map proposed transactions against these rules, structure deals to avoid unlicensed transfers, prepare the required ownership and financial‑interest disclosures, and coordinate filings and regulator follow‑up so that control can change hands without interrupting operations or jeopardizing licenses. For a deeper dive on owners and financial interest holders, see the firm’s analysis of sections 15003 and 15004.
Local Permitting: Cannabis Bans, Hemp Moratoriums, and Navigating County-Level Restrictions
One of the most consequential compliance issues for both cannabis and hemp businesses is local permitting — and the two industries face different but equally unpredictable local regulatory landscapes. Under Proposition 64, California cities and counties have broad authority to ban or heavily restrict commercial cannabis operations, and many jurisdictions have done exactly that: some prohibit all cannabis activity, others allow only certain license types, and those that do permit cannabis often impose conditional use permit requirements, caps on license numbers, and buffers from schools, parks, and residential zones. Cannabis operators must maintain both state DCC licensure and local authorization simultaneously; losing either one shuts down the business.
Industrial hemp faces a different version of the same problem. Although hemp is classified as an agricultural commodity under California and federal law, counties retain authority to impose moratoriums, acreage minimums, zoning restrictions, and conditional use permit requirements on hemp cultivation. Some counties have enacted and then lifted hemp moratoriums as they developed permanent ordinances; others maintain restrictions that effectively prohibit commercial hemp operations in certain areas. Hemp operators must also register separately with the agricultural commissioner in each county where they intend to cultivate, and county-level registration can be refused or revoked. Critically, California law prohibits growing industrial hemp on the same premises as DCC-licensed cannabis cultivation — a restriction that can complicate site selection for companies operating in both industries. The firm advises cannabis and hemp clients on navigating local permitting processes, monitoring ordinance changes, and structuring operations so that local compliance supports rather than undermines their state-level licensing or registration.o
Focused on Cannabis and Hemp Compliance
Whether you are streamlining an approach for a startup, or taking a current cannabis or hemp business through a renewal of a license or permit, The Law Office of Shay Aaron Gilmore can help deliver solutions. For jurisdictions that are exploring allowing or expanding cannabis and/or hemp activities, The Law Office of Shay Aaron Gilmore can assist with drafting and analysis of local ordinances. Shay also provides advice and counsel regarding:
- Truth in advertising compliance (California Business & Professions Code)
- Federal Trade Commission (FTC)
- U.S. Food and Drug Administration (FDA) compliance
- Regulatory compliance counsel for local ordinances, state laws & regulations
- Reporting requirements
- Testing laboratory compliance issues
Shay’s regular interaction and communication with state and local licensing authorities yields up-to-date information for clients across the cannabis and hemp supply chains.
What Trends Do You See in Cannabis Regulatory Compliance?
From Shay’s interview for the Master’s series on ReelLawyers.com
In my law practice, some of the regulatory and compliance concerns I see cannabis and hemp operators facing involve banking and financial services—including fintech solutions and improving access to banking. Environmental and sustainability concerns are also significant, as well as data privacy and security issues.
Representative matters
- Advised the buyer of a licensed manufacturing business in a highly publicized receivership of a major publicly traded cannabis group, negotiating satisfaction of historic tax obligations and coordinating the timing of closing against the onset of receivership and regulatory review.
- Counseled buyers and sellers in multiple acquisitions and sales of licensed manufacturers, distributors, cultivators, and retailers in different California regions, handling regulatory diligence, ownership‑change filings, and local approvals.
- Served as government‑relations adviser to a national hemp and cannabinoid retailer on a first‑of‑its‑kind California bill targeting online cannabis and hemp platforms, including providing testimony before a key legislative committee.
- Guided creditors and new owners through state licensing aspects of takeovers of distressed cultivation businesses where bankruptcy was unavailable, designing compliant control‑transfer roadmaps.
Related cannabis and hemp business services: Administrative Law, Corporate Law, Real Estate & Land Use, Commercial Contracts, Venture Capital Counsel, Employment & Labor Law, Intellectual Property Law.
Ongoing Compliance: Two Regulatory Tracks, Two Sets of Rules
Cannabis and industrial hemp operators in California answer to different regulators and face fundamentally different ongoing compliance obligations. Cannabis licensees are regulated by the Department of Cannabis Control and must maintain compliance with a dense web of state requirements: real-time seed-to-sale tracking through the state’s Metrc system, with 24-hour reporting deadlines for inventory discrepancies and transfer manifests, three-day windows for tagging plants and recording harvests, and mandatory 30-day inventory reconciliations. Cannabis licensees must also renew annually, submitting updated financial disclosures, premises diagrams, and evidence of continued local approval — and late renewals trigger a 50% penalty fee. Each license type (cultivation, manufacturing, distribution, retail, testing, microbusiness) layers on its own operational rules around security, packaging, labeling, and transportation.
Industrial hemp operators face a parallel but distinct compliance regime administered by the California Department of Food and Agriculture and enforced at the county level by local agricultural commissioners. Hemp registrations are also annual and must be renewed at least 30 days before expiration; any lapse in registration renders existing crops non-compliant and potentially subject to destruction. Instead of Metrc, hemp growers must comply with CDFA sampling and testing protocols: pre-harvest THC sampling is conducted by or coordinated through the county agricultural commissioner, and if a crop tests above the 0.3% delta-9 THC threshold it fails as California industrial hemp and cannot be sold. Hemp growers can also face a five-year registration ban after three negligent THC violations within five years. The firm helps cannabis and hemp operators understand which compliance framework applies to their operations — and where clients hold both DCC licenses and CDFA hemp registrations, ensures that compliance in one system does not inadvertently create problems in the other.
The firm provides Regulatory Compliance legal services to cannabis and hemp operators and investors in: