Until now, many of the large, public multi-state operators have kept their distance from the country's largest REC market. California is an expensive place to operate, and it hasn't offered major operators the same kind of return on investment as smaller and more stable markets.

That's no longer the case any more. Willis Jacobson writes:

"When REC sales became legal in 2018, many newly licensed operators saw razor-thin profit margins and had to contend with high taxes and a hypercompetitive climate still dominated by illegal operators. But now, the industry's biggest MSOs have begun to arrive."

• Part one of our series explains why MSOs are warming to the Golden State.
• Part two takes a look at the California dreams of Cresco Labs, Columbia Care, Trulieve and other major players.
• It's not always obvious which MSOs are active in the state, since they often operate under different brand names.

Separately, Forbes reports on MSO Curaleaf's plan to become the "Frito-Lay" of weed.

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The new California legislature meets for the first time this week. Coming soon: We'll preview of the next two years of cannabis legislation, and introduce you to key players in Sacramento.

Here's what's happening in California:

"We're going to dominate": Following Subversive Capital's blockbuster deal to acquire Caliva and Left Coast Ventures, WeedWeek talked to Subversive CEO Michael Auerbach about the deal, the role of Chief Visionary Officer Jay-Z and Auerbach's plans for the $575M on his balance sheet:

• Auerbach: "None of the traditional MSOs [multi-state operators] have a large footprint in the state, so it’s ripe for consolidation. $575M in cash is five times the amount of cash as the top MSOs [in California] combined. It’s going to be very difficult to catch us."

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"Product category of the future:" Olo and Kin Slips, California's two leading sublingual strips companies recently merged to create a dominant player in this niche.

• Sublinguals currently have 2%-3% market share.
• I spoke to Andrew Lobo, CEO of the combined venture, who argued that sublingual strips are "a form factor superior to any other for cannabis consumption." 
• As a zero-calorie option that doesn't affect the respiratory system, he anticipates "high double-digit to triple digit annual growth is highly achievable in the near term."

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SCOOP: CannaSafe, the testing company which told WeedWeek it tests 30% of the legal product in California, has had its license suspended. 

• A spokesperson for CannaSafe said the suspension came after a client test led to questions from the Bureau of Cannabis Control(BCC). The spokesperson declined to provide further details on the query or the product involved.  
• BCC declined to comment on an ongoing investigation.
• In May, CannaSafe said its revenue had grown a staggering 12,000% in the last three years. It operates one testing facility, in Van Nuys and aspires to open in additional states.
• There are about 30 other licensed testing labs in California.
• Reporting credit: Donnell Alexander.

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Surging sales boosted California's pot tax revenue to $307M for Q3. The total doesn't include city and county taxes.

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Is cannabis a thirsty plant?  A forthcoming report aims to dispel some of the misconceptions about cultivators' water needs.

• While cannabis doesn't use as much water as other major crops, in part because so much less plant matter is needed, the issue requires close attention as California and other western states cope with the "enduring problem" of water scarcity.
• Illegal growers typically consume far more water than their licensed counterparts.

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Get to Know: KushCo For a new feature, we asked diversified ancillary player KushCo about its businesses and key people. Want to see your company featured in a future edition of Get to Know? Drop us a line hello@weedweek.net

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Funded by pot taxes, California is awarding $30M for 34 cannabis related studies in fields like public health, criminal justice and the cannabis industry.

• We put together a list of the grants and the universities conducting the studies.

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The consumers suing CBD company CV Sciences have asked a federal judge to end an indefinite stay on the suit. They argue that the FDA is unlikely to clarify CBD's legal status as a dietary supplement anytime soon.

• They filed the lawsuit on grounds that CV's CBD products were illegally labeled as dietary supplements and/or illegally contained CBD as a dietary ingredient.

Here's what caught our eye this week:

• Los Angeles named 200 finalists for equity retail licenses, but it's not clear when they'll be able to open.
  MJBiz
• Here's what the new pandemic stay at home orders mean for the cannabis industry.
  MJBiz
• The U.N. removed cannabis from its list of most dangerous drugs, and recognized it as a medicine. The move will likely accelerate MED research.
  Vice
• SAFE investing: Attorney Jason Kornfeld of Mayfield Venture Law breaks down the Cannabis SAFE released by Meadow. It's a variation of Y Combinator's famous start-up investment structure, developed with their permission. He says the SAFE aims "to address the regulatory complexities that come with raising money in the industry."
• MedMen releases earnings after market close today. In October it reported revenue of $27.4M, down 40% from the previous quarter.
• A Headset report discussed the "good, better, best" pricing structure in cannabis retail.
• MSO Body and Mind said its annual financial statements will be delayed.
• Green Market Report talked to Michael Beaudry, CEO of HERBL, the largest distributor in California.
• San Francisco banned tobacco smoking, but not cannabis smoking, inside apartment buildings.
• Infused beverage sales are skyrocketing.
  Los Angeles Magazine
• Whole Foods CEO John Mackey discussed how the cannabis industry is 'changing the world.'
  Forbes