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,”

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