Eligibility Criteria for P3RR2 Lottery

The Social Equity Program (SEP) Commercial Cannabis Activity application processing for Type 10 (storefront retailer) pursuant to Los Angeles Municipal Code (LAMC) Section 104.06.1(c) is commonly referred to as Phase 3 Retail Round 2 (P3RR2). Applicants in P3RR2 will be selected by a random lottery process. 

In order to participate in the P3RR2 lottery, an individual must be verified as a Social Equity Individual Applicant under the criteria in LAMC 104.20(b)(1) This includes:

  • A qualifying California Cannabis Arrest or Conviction* prior to November 8, 2016; and,
  • At least one other eligibility criteria:.
    • 10 years of cumulative residency in a Disproportionately Impacted Area, as defined by police reporting districts; or,
    • Low Income in the 2020 or 2021 calendar year.

Please note that individuals who were previously verified as Social Equity Individual Applicants in 2019 and who wish to participate in the Phase 3 Retail Round 2 lottery for retail licenses must be verified again using the criteria above to participate in the lottery.

*An arrest, prosecution or conviction for a violation of Proposition D is not a California Cannabis Arrest or Conviction.

P3RR2 Lottery Procedures and Protocol

Brief Overview

In preparation for the Phase 3 Retail Round 2 Lottery (P3RR2) (Lottery), the Department of Cannabis Regulation (DCR) contracted with a third-party global business advisory firm called FTI Consulting Inc. (FTI) to administer the lottery selection process. FTI, along with DCR and other City departments, have planned a triple-blind lottery selection process. Social Equity Individual Applicants (SEIA) will  be randomly selected during the lottery. FTI will ensure a fair, unbiased and blind selection process using professionals removed from any matters involving cannabis or involving cannabis entities during the duration of the P3RR2 Lottery. Lottery selections will be done by FTI, not DCR. Additionally, the Los Angeles Office of the City Administrative Officer (CAO) contracted with a third-party audit firm, Sjoberg Evashenk Consulting (SEC), to audit the administration of the Lottery. DCR will make 100 retail storefront Pre-Application Review record slots available in the December 8 P3RR2 Lottery. The remaining retail storefront Pre-Application Review record slots will be made available in a future lottery.  

A “blind” selection process means that the entity which selects the applicants does not know their identity. A “triple-blind” process means that no one involved in the process, including FTI, DCR, and other City departments, will know the identity of who is being selected until after the selection process has been completed and the data from each party is reconciled.   

To accomplish the triple-blind process, DCR will assign a randomized alphanumeric sequence to every Lottery Registration record eligible to participate in the Lottery. The list will not include any SEIA’s names. DCR will send this sequenced list to the Office of the Los Angeles City Clerk (City Clerk). This is the first “blind” step, meaning that the City Clerk does not know the identities of those individuals entered into the lottery because it only received their randomized DCR number. The City Clerk will reassign each number on DCR’s sequenced list with a different randomized number. This is the second “blind” step, meaning that the new City Clerk numbers are further anonymized from the randomized DCR numbers to protect the individual identities of the SEIAs. The City Clerk will then send their list to FTI. FTI is divided into two teams, Team A and Team B. FTI Team A will assign the numbers provided by the City Clerk a new, randomized number for each individual. This is the third “blind” step.  FTI’s Team B will conduct the lottery selection process using the FTI numbers from Team A.  FTI’s Team B will then send the list of randomly selected FTI Lottery Designation IDs to the City’s independent third party auditor (SEC) and City of Los Angeles Administrative Officer (CAO).

All the lists from DCR, the City Clerk, FTI and the CAO will then be cross-referenced and compiled to identify the selected Lottery participants  The compilation of the lists that establishes the Selected Lottery participants will be livestreamed on the Department’s website for the public to view on Thursday, December 8, 2022, at 2:00 P.M. Pacific Time. DCR will notify the Selected Lottery participants by email and publish the list of selected Lottery participants to its website soon thereafter.

Expanded and Technical Outline of the Lottery Process and Protocol

The infographic below is only an example and does not represent the results of the 2022 P3RR2 Lottery.

DCR's Triple-Blind Process
  1. DCR will review and confirm Lottery Registration records submitted by 4:00 PM Pacific Time on Wednesday, November 23, 2022.
  2. DCR will assign a randomized alphanumeric sequence to every Lottery Registration record eligible to participate in the Lottery. DCR will provide the randomized alphanumeric sequence list (“DCR List”) to the Office of the City Clerk. The list provided to the City Clerk will not include the SEIAs’ names or Accela Citizen Access (“ACA”) Contact Reference ID numbers. This is the first “blind” step, meaning that the City Clerk does not know the identities of the Lottery participants. Separately, DCR will also provide a list with the SEIA’s last name, first initial, last two digits of the ACA Contact Reference ID number, and randomized alphanumeric sequence (“Key #1”) to auditors, Sjoberg Evashenk Consulting (SEC) and the City of Los Angeles Administrative Officer (CAO). 
    1. Example of Key #1 (SAMPLE DATA, NOT ACTUAL RESULTS):

      Example of Key 1
    2. Example of DCR List provided to the City Clerk (SAMPLE DATA, NOT ACTUAL RESULTS):
      Example of DCR List to City Clerk
    3. The City Clerk will assign a new randomized alphanumeric sequence (“City Clerk List”) to every entry on the DCR List. Separately, the City Clerk will also provide a list matching the City Clerk List to the DCR List (“Key #2”) to SEC and CAO. The City Clerk will provide the City Clerk List to FTI. FTI has two dedicated teams, Team A and Team B. The list provided to FTI’s Team A will not include the DCR List. This is the second “blind” step, meaning that the City Clerk’s alphanumeric sequences are further anonymized.
    4. Example of Key #2 (SAMPLE DATA, NOT ACTUAL RESULTS):
      Example of Key 2
    5. Example of City Clerk List provided to FTI’s Team A (SAMPLE DATA, NOT ACTUAL RESULTS):
      Example of List for FTI Team A
  1. FTI’s Team A will receive the anonymized City Clerk List and assign a new randomized alphanumeric sequence (“FTI Lottery Designation IDs”) to every entry on the City Clerk List. FTI’s Team A will provide a list matching the FTI Lottery Designation IDs to the City Clerk List (“Key #3”) to SEC and CAO. FTI’s Team A will also provide the FTI Lottery Designation IDs to FTI’s Team B. The list provided to Team B will not include the DCR List or the City Clerk List. This is the third “blind” step, meaning that the FTI Lottery Designation IDs are further anonymized from the City Clerk List, DCR List, and the Lottery Participant’s individual identity.

    1. Example of Key #3 (SAMPLE DATA, NOT ACTUAL RESULTS)

      Example of Key 3
    2. Example of DCR List provided to FTI’s Team B (SAMPLE DATA, NOT ACTUAL RESULTS):
      Example of List for Team B
  1. FTI’s Team B will randomly select 100 of the FTI Lottery Designation IDs using the Random Number Generator in the Microsoft Excel Tools platform (“Microsoft”). 

    1. The algorithm used by Microsoft will provide an array of random numbers which will be one-to-one assigned to the blind FTI Lottery Designation IDs received from FTI’s Team A. The array of random numbers will be sorted ascending from smallest random number to largest random number, thus also sorting the FTI Lottery Designation IDs simultaneously.
    2. The random numbers provided by the Microsoft program will be chosen from a uniform probability distribution, with equal probability assigned to each FTI Lottery Designation ID.
    3. The algorithm will be seeded with a decimal number, representing the date of selection (December 8, 2022). The benefit of using a “seed” to begin the random number generator is the ability to replicate the random series and to audit the use of the random seed and the random series produced by the algorithm from it.
    4. Using the seed, another member of FTI’s Team B will replicate the same process to ensure the same results. 
      1. The random processes discussed above are well-established and accepted processes performed by statisticians and used in academic, regulatory and commercial settings to identify randomly generated outcomes.
    5. After steps c. and d. are completed, FTI’s Team B will provide the list of randomly selected FTI Lottery Designation IDs (“Key #4”) to the City’s independent third party auditor, SEC, and CAO.
    6. Example of Key #4 (SAMPLE DATA, NOT ACTUAL RESULTS):
Example of Key 4
  1. The City will cross-reference the “Keys” (Key #1, Key #2, Key #3, and Key #4) using the “VLOOKUP” function in Microsoft to connect the Lottery Participant’s ACA Contact Reference ID numbers to the Keys which will be compiled into a single list that matches the SEIA last names, first initials, last two digits of the ACA Contact Reference ID numbers, DCR List of randomized alphanumeric sequences, City Clerk List of randomized alphanumeric sequences, FTI Lottery Designation IDs, and FTI Lottery Designation ID Selections which will establish the corresponding SEIA to each randomly selected FTI Lottery Designation ID (“selected Lottery participants”).
  2. The compilation of the Keys that establishes the selected Lottery participants will be livestreamed on the Department’s website for the public to view on Thursday, December 8, 2022 at 2:00 P.M. Pacific Time. DCR will notify the selected Lottery participants by email and publish the list to its website.
    1. Example Compiled of Keys (SAMPLE DATA, NOT ACTUAL RESULTS)
Example of Compiled Keys
  1. The City’s third party auditor, SEC, will review the entire process once completed. SEC will compare the list of selected Lottery participants to the Keys and prepare a report of their audit findings.

NEXT STEPS FOR LOTTERY PARTICIPANTS

P3RR2 Lottery Workflow Image

Phase 3 Retail Round 2 & Undue Concentration:

  • Undue Concentration" means the Applicant's Business Premises is located within a higher cannabis license/population ratio within the community plan based on the American Community Survey, updated annually, than the following: ratio of one license per 10,000 residents for Retailer (Type 10); a Microbusiness involved in on-site retail counts towards the Undue Concentration License limits applied to Retailer (Type 10).
  • P3RR1 Applications deemed eligible for further processing under Section 104.06.1(b)(6) as of January 1, 2020, and Applications deemed eligible for further processing under Section 104.06.1(b)(7) after January 1, 2021, shall not be included in the calculation of Undue Concentration, as defined in Section 104.01(a)(49).
  • Six Community Plan Areas have reached Undue Concentration: (1) Central City; 

(2) Central City North; (3) Harbor Gateway; (4) Sherman Oaks - Studio City;

(5) Sun Valley - La Tuna Canyon; and, (6) Venice.

100 SEIAs may be selected during the Application lottery and be afforded a maximum of one (1) calendar year from the date of the Application lottery to complete the Pre-Application Review process using a compliant property in any Community Plan Area that has not reached Undue Concentration on a first-come, first-served basis until each Community Plan Area has reached Undue Concentration.

Technical Assistance & Resources

Under LAMC section 104.06.1(c), DCR must make technical assistance available for a period of at least 45 days before opening the P3RR2 lottery registration period. DCR began providing technical assistance on August 31, 2022. Technical assistance is the Department of Cannabis Regulation’s (DCR) process of providing targeted support to a group of stakeholders. Common types of technical assistance include, but are not limited to, webinars, virtual training, email exchanges, or phone calls. DCR has sent emails to all individuals requesting SEIA verification in 2022 and posted information on its website regarding Technical Assistance webinars.

Technical Assistance Webinars

  • Webinar #1: August 31, 2022, 9:30 A.M.-11:00 A.M. PT: An overview of the P3RR2 lottery registration process and the relevant timing considerations for Social Equity Individual Applicants (SEIA) if they are selected in the P3RR2 lottery. The August 31, 2022, webinar recording and presentation slides can be accessed here.
  • Webinar #2: September 14, 2022, 6:30 P.M. to 8:00 P.M. PT: How to proactively prepare for the lottery and/or the application process if selected as a verified SEIA, including an overview of the BTRC application process and Legal Entity Record process. The September 14, 2022, webinar and presentation slides can be accessed here.
  • Webinar #3: September 28, 2022, 6:30 P.M. to 8:00 P.M. PT: Step-by-step instructions on how to register for the lottery. The September 28, 2022, webinar and presentation slides can be accessed here.
  • Webinar #4: October 12, 2022, 6:30 P.M. to 8:00 P.M. PT: Overview of Webinars 1-3 and an open Q&A regarding the Phase 3 Retail Round 2 lottery registration process. The October 12 webinar and presentation slides can be accessed here.

Technical Assistance on the Web

There is a wealth of valuable information on DCR's website for current and prospective Social Equity Individual Applicants (SEIAs), including information on application and licensing processes. There is also valuable information available for verified SEIAs on DCR's Learning Management System (LMS).

There is also additional information available on DCR’s website. Below are some of the more frequently visited pages on the DCR website:

DCR also encourages all SEIAs, including those interested in the P3RR2 lottery process, to proactively seek out information on Application Procedures and Resources page in advance of the lottery or before submitting other license applications. If an individual is not selected for the lottery, verified SEIAs may still submit applications for several other license types. You can find that information here.