Cannabis Bonds

A cannabis bond, also called a marijuana bond, is a surety bond that some states, counties and cities require before they license a cannabis business. Bonds may apply to cultivators, manufacturers, distributors, retailers, testing labs and microbusinesses, for both medical and adult-use cannabis. The bond guarantees that you will follow cannabis laws and covers specific costs, such as destroying cannabis products after a violation, unpaid taxes or site cleanup.

How a cannabis bond works

The bond is an agreement among three parties: you, the cannabis business (principal); the state or local agency that licenses you (obligee); and the surety that issues it. For example, if a licensing violation requires your cannabis products to be destroyed and you don't cover the cost, the state can make a claim against your bond to pay for it. If the claim is valid, the surety pays up to the bond amount.

Bond amount and your premium

The regulator sets the bond amount, and it varies by state, license type and locality. In California, for example, each annual cannabis license requires a bond of at least $5,000 payable to the state for each licensed premises, and a business with several licenses can use one aggregated bond. Some counties and cities require their own bond on top of the state's. The bond amount is the most the surety will pay on claims, not the price you pay. Your premium depends on the surety's underwriting, so request a quote rather than relying on a fixed price.

Cannabis bonds you may need

Requirements vary widely, and not every state requires a bond. Depending on where you operate, you may need:

Finding a surety for cannabis

Because cannabis is still illegal under federal law, not every surety company writes cannabis bonds. Your bond must come from a surety that is authorized in your state and willing to bond cannabis businesses, and it must be on the regulator's required form. Working with an agency that already places cannabis bonds can save time when you apply.

Start your cannabis bond application

What happens when a claim is filed

If you fail to meet an obligation the bond covers, the agency can make a claim against your bond. The surety investigates. If the claim is not valid, it is denied. If it is valid, the surety pays the agency up to the bond amount and you must repay the surety. Unlike general liability insurance, a bond does not take the cost off your hands.

Keeping your bond in force

Cannabis license bonds usually run with your license period and renewals, and you pay a premium each year to keep yours active. Letting the bond lapse can lead to suspension of your license. If you add a licensed premises or change ownership, your bond may need to be updated too.

Not sure which bond you need?

WWIS is based in Litchfield Park, Arizona, is licensed in all 50 states and has helped businesses with license and permit bonds, including cannabis bonds, for more than two decades. Call 888-518-8011 or email [email protected] and we'll help you find the right bond for your cannabis license.