WSLCB - Board Meeting
(May 26, 2021)

Here are some observations from the Wednesday May 26th Washington State Liquor and Cannabis Board (WSLCB) meeting.

My top 3 takeaways:

• A retail licensee urged board action on a prospective program to reward those receiving the coronavirus vaccination called "Joints for Jabs."
  • Stacey Peterson, APEX Cannabis Co-Founder, identified herself and her husband/business partner Troy as Washington CannaBusiness Association (WACA) members. She said WACA leadership had made a presentation to the Governor’s office regarding “allowing cannabis retailers to provide an incentive to vaccinated customers.” Peterson said Governor Jay Inslee “endorsed the concept and it is now with the LCB for review of how such a program would be structured” (audio - 3m, written comments).
    • Peterson had met “with the leader of a local community health provider in the Spokane area” that was interested in partnering “with community organizations and businesses to provide vaccinations in smaller settings.” Her business location was a possible setting, she explained, as it included “an area dedicated to medical consultations.” While discussions between herself and public health staff continued, “we are excited about the potential opportunity” to help “the goal of promoting vaccinations within the community.” Although retailers were prohibited from “offering giveaways,” Peterson noted, “we believe consumers will be excited and motivated by the complimentary product.”
    • She asked the board to have agency staff “fast-track the Joints for Jabs initiative” and offered to have WACA members meet with WSLCB leaders to “discuss issues, concerns, or solutions.” She closed by saying the program had potential to demonstrate licensees and the agency were “a major contributor and part of the solution regarding the fight against COVID-19.”
  • Board Chair David Postman expressed his interest in the concept, calling the collaboration with health officials a “partnership that I think is important if we’re going to try and do something like this.” He felt the proposal “answers a lot of the concerns that I personally would have” about what “free product giveaway would mean.” Postman said a balance needed to be struck between “the public health gain from getting more people vaccinated, and then the lack of some of the controls that, that could happen.” He indicated that staff had been evaluating the possibility along with members of the governor’s office and that “until a couple weeks ago we never thought about, you know, free beer giveaway for, for shots.” But agency officials weren’t opposed to the concept and would “see what we can do” (audio - 2m).
    • The Ohio Governor also incentivized vaccination of citizens, including by offering lottery prizes up to a million dollars for vaccinated adults which the governor announced had increased participation. Other states have emulated this approach, including Oregon.
    • Activists in Washington, D.C. organized a “Joints for Jabs” campaign on April 20th during which “volunteers stationed at 30 vaccination sites across the District of Columbia gave away over 8 pounds of DC-grown cannabis rolled up into over 4,200 joints!”

• A hemp processor addressed WSLCB momentum to restrict cannabinoids created through conversion of cannabidiol (CBD) distillate, claiming that "hemp-sourced THC is just the latest innovation" in the cannabis market.
  • Marcus Charles, clēēn:tech, clēēn:craft, and clēēn:hemp Co-Founder, referenced the agency policy statement on “Tetrahydrocannabinol (THC) compounds other than delta-9 and the conversion of CBD, hemp, or both to delta- 8 THC, delta-9 THC, or any other cannabis compound that is not currently identified or defined.” He described his company’s work to “license hemp-sourced THC technology to regulated cannabis license holders” included “hemp-sourced CBD, which is processed from the same cannabis plant as marijuana, hemp-sourced THC reflects innovation made possible by extensive research and development into the natural properties and possibilities of cannabis in general” (audio - 5m).
    • Charles acknowledged discussions about restricting the process in the legal market, feeling that “health and safety are the most critical priorities in a well regulated intoxicant market.” He argued that cannabis products sold “outside of regulated marketplaces” were “not produced with health and safety as paramount” which could hurt consumers and “undermine public trust and confidence in the work of the licensed industry.”
    • He encouraged the board to “finalize and adopt mandatory quality testing” for all legal cannabis products, saying such an approach was “centering the public health” of the population and ensuring the “baseline” of cannabis regulation was “safety first.” Charles told the board his company had engaged in “rigorous testing of hemp-sourced THC” and was “happy to report that our licensed process is sound, product is safe, and we would be pleased to share lab results” with agency staff. He promised transparency and wanted his company to be “a model for the commitment that you should expect from all of your licensed players.”
    • Charles was concerned that the agency’s “clarifying policy statement” and comments by board members were leading towards policymaking “that would inadvertently pick winners and losers in our legal marketplace based on some kind of undefined worthiness scale.” While supportive of regulations that enabled “a strong and stable marketplace,” he said WSLCB officials needed to permit license holders “the tools to innovate and expand their current business models to prepare for the future with new, innovative, safe products.”
    • Concluding that “any decisions on the worthiness of place in the Washington state cannabis market belongs to the consumers,” Charles asked WSLCB representatives to “not make the choice of consumers based on preference or familiarity of one business model over another.”
  • Postman was in agreement with Charles on health and safety concerns but he hadn’t heard board discussion of "using some undefined worthiness scale" to address delta-8-THC “issues.” He added that remarks from one board member “do not make policy" and that opinions were always tempered with research from staff and discussion before adopting a position. Postman stated the intentions of agency staff on cannabinoid conversion were “not different from what you laid out, Mr. Charles,” and assured there would be “an iterative process” involving legislative action and agency rulemaking. Postman made clear the policy and clarifying statements couldn’t be considered an “enforcement order,” and that it was "all but certain" officials would seek greater statutory authority. He remarked on “talk about how we’re behind other states on this or we have a very different approach. I don’t believe that’s true.” Later in the meeting he shared his ambition that WSLCB “be a model for, for this sort of rulemaking” (audio - 3m).
  • Earlier, Policy and Rules Manager Kathy Hoffman went over WSLCB rulemaking around the “evaluation of THC compounds other than delta-9” which the board initiated on May 12th. She said no comments had been received at that time. A deliberative dialogue session on “Cannabis Plant Chemistry” was scheduled for June 3rd and would feature a “diverse group of experts” along with registered participants for the session from other states and Canada. Hoffman assured the board that staff remained “committed to grounding this work in fact and data” and that rule and policy development would make “space for all of the interests to be heard and discussed equally” (audio - 1m).

• A lobbyist and former WSLCB board member spoke up about perceptions of heavy handed regulation by agency staff and thwarted efforts to normalize cannabis business processes.
  • Chris Marr, Marr Government Affairs Principal Lobbyist and a former board member, admitted that during his time with the agency “our work fell short in a number of areas.” He called attention to a “failure to prioritize licensee diversity and a tendency towards overregulation that, in retrospect, has limited innovation” (audio - 5m, written comments).
    • Marr felt that board members had taken "umbrage" at comments from WACA Executive Director Vicki Christophersen at the May 12th board meeting and “I’m not sure if it was the message or the messenger.” However, he said the concerns she’d voiced “have been expressed by licensees I work with.” While acknowledging “much has been done” to resolve those concerns, there was “much more to do to evolve the culture and focus on education over enforcement.”
    • Marr relayed his “focus on changing laws and regulations” in order to have “the industry operate like any other.” He had hoped the Cannabis 2.0 campaign would allow for this, but “that has not been the case.” Marr referenced his comments to the board on “private labeling” in May 2018 following board denial of his rulemaking petition on the topic. “Yet seven months later the LCB lost an [administrative law judge] ALJ decision on its prohibition, yet nothing was ever communicated to licensees and no rule change was ever initiated.”
    • He also tried unsuccessfully to “have LCB permit revenue-based [unintelligible] agreements, which are common in other industries. The industry was successful in passing a bill in 2017. Proposed rules allowed only fixed compensation,” he said, leading Marr to “help pass [HB] 1794” permitting “all cannabis licensees to use revenue-based agreements.” However, “LCB still does not allow retailers to use them,” he commented.
    • Marr brought up cannabis “flower packaged in handled jars...it makes no sense to discourage the use of packaging that will end up in a landfill. I mean, [what] public safety benefit does it serve? Why are our [packaging and labeling] PAL rules so tone-deaf to sustainability?”
    • He then mentioned SB 6057, a 2020 bill which proposed “to allow volume discounting, which the board permits for retailers but not for processors.” He claimed “your own traceability system tells you this prohibition is violated regularly.” SB 6057 had failed to become law and Marr felt WSLCB leaders should have “a dialogue on a solution” for the subject.
    • While “criticism isn’t always easy,” Marr said, “it comes from entrepreneurs who put at risk everything they...own to launch this industry.” He said these people had seen “a more evolved regulatory approach in other states which puts them at a disadvantage in a looming 50-state market.” Marr closed by asking WSLCB leaders to “work with WACA and other stakeholders” to evolve the regulated market.
      • At publication time, Marr was a member of WACA and also served as a regulatory advisor for the Craft Cannabis Coalition (CCC).
  • During his subsequent public comment, Jim MacRae of Straight Line Analytics also referenced Christophersen's May 12th comments, saying he agreed “with some of the stuff she said but” he did “take issue” with her assertion that people were “being dealt with administratively now...as if the old penalties were still in effect.” He noted that he’d been told directly the “new penalty grid that’s less onerous” wasn’t intended to function retroactively to excuse prior violations “and I really don’t want to see the board go away from that.” MacRae concluded that he was troubled by “the aggressive attempts at regulatory capture that are coming out of [WACA] and the tag team we just saw with Mr. Marr” (written comments, audio - 5m).
    • In June 2020, licensed tier 3 producer Sunshine Farms sought judicial review of a WSLCB adjudication ruling and requested retroactive application of reformed penalties. On March 19th, a Thurston County Superior Court judge issued an order wherein the “matter is REMANDED TO THE BOARD with directions to apply ESSB 5318 retroactively in determining the appropriate penalties for Petitioner’s conduct according to the current penalties schedule.” The order was narrowly crafted to only apply in that particular instance, but established a precedent in case law that contravenes WAC 314-55-509(4).
  • Postman admitted to being “one who did take some umbrage" from Christophersen’s remarks even as he generally welcomed criticism, but felt it was unproductive “when people address motive of LCB staff or board members.” It became “hard to move into a productive conversation when it begins'' from a point of “widespread condemnation based on alleged motive and the maliciousness that, that some believe exists,” he said (audio - 7m).
    • Postman had asked people to "set aside that attitude in addressing motive and just really try to talk about the policy differences,” saying that “luckily” since he joined the board recently “there aren’t too many people who are mad at me yet, but they’re mad about other things.” He expressed disappointment that “people like [Marr] who are known to our staff and, and other prominent people in the industry” who communicated with officials “on a regular basis, and we hear one thing then, and then a different message publicly, and that’s upsetting as well.”
    • Postman relayed that he and staff considered it “a surprise...when they are attacked in a public comment." He felt personal criticisms between people in an established relationship merited the “professional courtesy” of first communicating objectives privately before bringing them up “in a public meeting that doesn’t allow for a true discussion or a chance for those staff people to respond...That shakes the confidence of public staff.”
    • Appreciating Marr’s concerns around regulation, Postman agreed agency officials were still “grappling” with cannabis oversight “just like every state.” He said a degree of “romanticizing” cannabis policies in other legal states was partially due to those jurisdictions having “the advantage of not having been first” and learning from Washington and other states’ policymaking. Postman argued Washington officials had “invented this system, now we need to reinvent this system,” adding that no one at the agency had ever relayed an impression that “we’re done, we got it.” He considered continued innovation in the cannabis sector to be expected.
    • Among the stakeholders that needed to be listened to were “public health advocates,” Postman noted because "public health is important." While it could be “easy to sort of make fun of concerns about a handle on a jar, but I’ve talked to the public health people and there are concerns about it,” he stated. Additionally there were “things that are on the books that we can’t ignore even if retailers decide that it’s ridiculous,” Postman asserted, as he indicated the public health sphere had “a real concern about normalization of these things.” A “promotion that lives on,” he suggested, like a mug which read “buy your weed at Joe’s Weed Shop” could end up “on your kitchen table, that’s a possible message there. I don’t think it's ridiculous to say ‘is that really the right thing to do, to have that in a place where children might see it?’ and does that normalize it?” Even if a restriction on cannabis packaging that was appealingly graspable may not “exist forever,” Postman contended, “it’s on the books, so it can’t just be ignored. Nobody has been punished for it at this point...and there are some public health concerns.” He posited that picking specific examples of rules made it “easy to pick one little thing out at any one time and make any regulatory body look silly in that way...but there are reasons for it” including reasons “why enforcement needs to take it seriously.” Postman said this seriousness was part of “a safe and regulated system” which all stakeholders had expressed as a goal of the market, “so I beg of you to, to not try to make light of these safety issues.”
    • He wrapped up his remarks by saying, “I think the process that we’re following on delta-8, etcetera, will in fact be a model for, for this sort of rulemaking...we’re not picking winners and losers any more than any regulatory scheme ever does.”
  • Board Members Ollie Garrett and Russ Hauge echoed Postman’s sentiments, with Garrett saying she was confident “the community welcomes how you are responding openly...which is new and something we didn’t do in the past” (audio - 1m). Hauge agreed as well, enjoying both “this new dynamic...and I appreciate the comments that have come forward and the opportunity to address some of the claims of our shortcomings in real time” (audio - <1m).