Cannabis Surety Bond – California

cannabis surety bond

As a component of State licensing, commercial cannabis business operating in California are required to obtain a surety bond. A separate cannabis surety bond is required for each license held by a licensee. The requirement applies to both medical and adult-use cannabis businesses across the spectrum of license types, and the bond must be issued prior to obtaining a State License.

The bond shall be issued by a corporate surety, a company who issues such bonds, that is licensed to transact surety business in the State of California. The bond must be issued in a coverage amount of at least $5,000.00, payable to the California Licensing Agency (Bureau of Cannabis Control, Manufactured Cannabis Safety Branch, CalCannabis Cultivation Licensing) responsible for issuing your Annual State Cannabis License. Some local jurisdictions (cities and/or counties) also require surety bonds as a component of the local permitting process.

What is a California Cannabis Surety Bond?

A surety bond is an agreement between 3 parties:

The Obligee:  The state, municipality, or other entity requiring the purchase of the bond.

The Principal:  The business seeking the surety bond.

The Surety:      The bonding company that executes the bond and provides a guarantee to the Obligee that the Principal will fulfill their requirements.

A cannabis surety bond is a way for the State Licensing Agency to ensure payment for the cost of destroying cannabis product, when such destruction is necessitated by a violation of the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) or Title 3, Division 8, Chapter 1 of the California Code of Regulations. The bonds also act as a guarantee that businesses will meet their licensure and permit requirements and conduct business lawfully.

How Much Does a California Cannabis Surety Bond Cost?

The cannabis surety bond premium, or annual cost, is typically in the range of $250 to $350 per $5,000.00 bond. Bonds must be renewed or acquired annually as a component of an annual State Cannabis License.If you need assistance in obtaining a cannabis surety bond, or have other California cannabis business questions, contact us at our Santa Rosa office to set up a consultation.