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How cannabis surety bonds work
Quick answer: A cannabis surety bond is required by some states to get or keep a cannabis business license. Each license usually needs its own bond, though California allows one combined bond when a business holds several licenses. Requirements vary by state. The Cannabis Coverage Company works with a carrier that charges a flat rate rather than a rate based on your credit score.
A cannabis surety bond is required by some states in order to operate a cannabis business and is often required in order to obtain a cannabis business license. By obtaining the bond, you will be in compliance with state regulations and laws. Without it, you may not be able to obtain your license or may face penalties including fines, litigation, and may run the risk of having your business completely shut down. For each license that you obtain, a surety bond is required for that license. This means that, for example, if you have a retail license and a cultivation license, you are required to have a surety bond for both licenses.
At the Cannabis Coverage Company, we have access to a carrier that charges a flat rate, unlike many other companies that charge a rate based off of your credit score. In other words, we offer a carrier that will charge you a rate that has no correlation to your credit score, which means you have less to worry about!
Because surety bond requirements vary from state to state, the best thing you can do is contact us today to find out what coverages you need to remain in compliance with for your state laws.
For example, if you live in California, our agents are able to provide you with information regarding what a surety bond is as well as information that is specific to California requirements. We can educate clients on California cannabis bond requirements and all other inquires.
Cannabis bond requirements: state examples
California: according to the Department of Cannabis Control (DCC), Section 15002 of its regulations (4 CCR Section 15002) requires an application for an annual cannabis license to include proof of a surety bond of at least $5,000 payable to the State of California for each licensed premises. The bond must be issued by a corporate surety licensed to transact surety business in California, and DCC allows an aggregated bond when the same commercial cannabis business holds multiple licenses. See DCC Form 8113: Commercial Cannabis Licensee Bond.
Other states with a cannabis bond requirement include:
- Oklahoma: the Oklahoma Medical Marijuana Authority (OMMA) requires commercial medical marijuana grower license applicants and licensees to submit either a surety bond or an attestation of land ownership. OMMA states that the bond shall be no less than $50,000 for each license and that OMMA may require a higher amount. See the OMMA bond requirement.
- Ohio: Ohio Administrative Code rule 1301:18-3-08 requires each cannabis licensee to maintain financial responsibility, including commercial general liability insurance covering products liability plus either an escrow account or a surety bond. The rule sets the amount by license type, from $50,000 for dispensaries to $750,000 for level one cultivators. See OAC 1301:18-3-08.
The amounts above are the bond amounts the regulators require, not the cost of a bond. Rules change, so confirm the current requirement with your state regulator, or request a quote and we will help you find out what your licenses need.
Cannabis surety bond FAQ
What is a cannabis surety bond?
A cannabis surety bond is a bond that some states require in order to operate a cannabis business, and it is often required to obtain a cannabis business license. Having the bond in place helps keep your business in compliance with state regulations and laws.
Do I need a bond for each cannabis license?
Usually, yes. Where a state requires a bond, a surety bond is generally required for each license you obtain. For example, if you hold a retail license and a cultivation license, you may need a surety bond for both licenses. Some states, such as California, allow an aggregated bond when one business holds multiple licenses.
What happens if I do not have a required cannabis bond?
Without a required bond, you may not be able to obtain your license, and you may face penalties including fines and litigation, along with the risk of having your business shut down.
Can The Cannabis Coverage Company help with cannabis bonds in other states?
Yes. Surety bond requirements vary from state to state. The Cannabis Coverage Company has been writing cannabis insurance since 2009, is licensed in all 50 states and is part of Lions & Coventry, so we can help licensed cannabis businesses nationwide find out what their state requires. Call (916) 967-7715 to start a quote.