Washington State is looking at the future of its cannabis industry
I absolutely loved Washington state when I lived there. I lived in Seattle for seven years and was one of the first attorneys in the state to take on medical cannabis clients in 2010 and adult clients again in 2012 when I-502 passed away. Our law firm is a pioneer in the cannabis space, particularly in Washington State, where our cannabis practice began many years ago.
I also think Washington has a top notch cannabis program when it comes to its regulations. They are clear and comprehensive, and set up licensees for success because the industry understands what it gets most of the time from the Washington State Liquor and Cannabis Board (“LCB”). Of course, there is ambiguity around the Washington Administrative Code and cannabis (as in all states), and it always will because different license analysts give competing interpretations of the law and rules on everything from filing label reviews to Analysis of real parties of interest. I certainly don’t agree with every LCB rule in the books, but I respect Washington for the cannabis program it has created and sustained over the years.
Photo by Flickr user Tanya
All of these are why I was incredibly excited and honored to testify at a legislative working session of the Washington State House Commerce and Gaming Committee on March 26th. You can watch the entire hearing here. I moved to Los Angeles in 2017 and have really focused on the California cannabis scene for a while now, but I keep up with the Washington cannabis market and our company continues to have its cannabis practice outside of Seattle.
When I was contacted by the House of Representatives Program Research Bureau to speak at this working session, I was intrigued by the subject from the start. My experience with Washington is that its market is pretty small (but relatively powerful) and that the state really had no interest in dismantling some of its protective barriers to entry (like the pesky six month residence requirement on property) and other bureaucracy keeping licensees under the rules of the “bound house”. The specific topic here was “Examining the Future of the Cannabis Industry in Washington State” with an emphasis on how the state can set up its current licensees for the federal ban; and in particular what can the state do and what should it be aware of in order to make its licensees competitive for upcoming national and international marketplaces.
In 2016 I gave a TedX lecture on Orcas Island about whether state-legal cannabis actually creates “Big Marijuana” (this lecture now has over 119,000 views). Washington State is now directly dealing with the issues I raised in my talk, but in its own way in Washington the state is careful and thoughtful as it approaches the national stage. Ultimately, I think the committee wanted to hear from me because, at this point in time, I have had extensive business and regulatory experience in several cannabis states (particularly Washington and California, and the two couldn’t be more different) for over a decade.
Some of the subtopics the committee examined during this session were industry trends, how to mitigate future monopolies while being entrepreneur-friendly, vertical integration, the issue of residence, and social justice (among others). After working in the California cannabis market, my advice to the committee during the hearing was to drop the six month residency requirement. In many ways, this residency requirement is the final barrier keeping large, legitimate corporations from really entering Washington (aside from your usual, complicated IP license agreements or other third-party “service” agreements with licensees that are very likely to violate them Break Washington’s cannabis laws no matter how you slice them).
If Washington is to be as competitive as possible, it has to drop the cloak of the shack on property at some point – and simply not removing it for financiers is just not enough. I also suggested Washington follow California with a state organic processing and labeling program, as well as an appeals program (given Washington’s strong outdoor growing culture and the existing wine industry, which is mostly east of the Cascades and provides the blueprint). And I recommended that the state really study social justice programs across the country (including Los Angeles) that have both failed and succeeded so that the state can really try to set the gold standard in this difficult arena.
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I also addressed local scrutiny, specifically that big cannabis operators can’t get too big (I also suggested creating a distribution license if the state is really concerned about verticality.) Washington is a state that has the LCB will license an applicant even though that applicant may not have the full blessings of their city or county. While it’s great to get a state license, that privilege is ultimately meaningless if your city or county doesn’t allow you to open your doors (side note: my company fought for years against the town of Lacey for its local medical cannabis bans , and It’s incredibly hard to beat the local government for its overwhelmingly strong police powers.
Photo by MILKOVÍ via Unsplash
If Washington is really concerned about multi-state operators or the Altria of the world becoming gangbusters within its borders, the state should look into stronger local controls (just ask California and Oregon) that locals will definitely make sure of that 1) comes into their communities and 2) how many operators can establish businesses (through local licensing programs that include zoning, competitive licensing or lotteries, development agreements, etc.). Some local controls already exist in Washington State, but they could be improved and / or refined.
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I have no doubt that at some point Washington will be a state that can rock the stage in the U.S. cannabis market and beyond. The state is too shrewd and too experienced in the cannabis industry not to revise the laws and rules that served it well when the Cole Memo was introduced under an entirely different Department of Justice. Washington realizes that if it stays the way it is now, it will only ever be as big and successful as other power plant states like California, Florida, New York and Nevada.
In light of this intense discussion with the Commerce & Gaming Committee, I have the feeling that a big change is emerging for the Evergreen State at some point. Hopefully this will ensure Washington is among the group of states driving national trends in cultivation, distribution, product and branding, and cannabis tourism.
Hilary Bricken is a partner at Harris Bricken. This story was originally published on the Canna Law Blog and republished with permission.