WSLCB - Board Meeting
(March 2, 2022)

Here are some observations from the Wednesday March 2nd Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• Staff provided a rulemaking update before the board adopted the CR-103 for Quality Control (QC) Testing and Product Requirements, concluding a multi-year rulemaking project.
  • Electronic Service (audio - 1m, video, Rulemaking Project)
    • Policy and Rules Manager Kathy Hoffman relayed that the project was still in a “developmental stage” with continuing internal meetings. She expected to present a CR-102 “around April 13th,” in which case the public hearing would be May 25th, “with an adoption date…of early June.”
  • Social Equity (audio - 1m, video, Rulemaking Project)
    • Hoffman said that “draft conceptual rules for the social equity program are currently under internal review” and would include structural, “non-substantive” changes around licensing “to increase readability.”
      • A listen and learn forum scheduled for March 16th would be announced with the release of draft conceptual rules on Monday March 7th, she stated.
      • Hoffman planned to present the board with proposed revisions “on March 30th. And that would set the public hearing date on that project for May 11th, with adoption in early June.”
      • She admitted the intended timeline was “aggressive,” but a “doable timeline given the…effort that the agency’s put into that work.”
    • Board Chair David Postman was curious to know “when, then, might action be taken, something would happen once those rules are in place,” presumably meaning the opening of a social equity retail application window. Hoffman said things which “need to be put in place” included a “social equity contractor” and “some additional training that I know our Licensing Division is very committed to making sure is available to potential” applicants. She anticipated that could be accomplished for WSLCB to begin processing equity applications “by mid-summer,” which Postman called faster “than I initially thought.” Hoffman made clear that assessment was based on an assumption that “there aren't significant, substantial changes that we need to make to the draft.” Only two weeks were allotted after the listen and learn to propose rules to the board, she noted, and turnaround time by the Washington State Office of the Code Reviser wasn’t always “rapid” (audio - 2m, video).
      • Contracting with a third-party entity to qualify and prioritize equity applicants using a scoring rubric was one of the recommendations from the task force, though WSLCB Licensing staff advised modifying this rubric for HB 2022. Section 1(3)(a) of the last iteration of the bill detailed the contractor role.
      • At a September 2021 Board Meeting, Scheril Murray Powell, a Business Development Manager for Creative Services, Inc (CSI), offered to have her company assist the agency with handling applications.
  • QC Testing and Product Requirements (audio - 4m, video, Rulemaking Project) 
    • Policy and Rules Coordinator Jeff Kildahl reported that the final rules in the CR-103 would require all legal cannabis products “be tested for pesticides in addition to the currently required suite” of tests. Additionally, rule changes would require “randomized, or investigation-driven, testing for heavy metals,” he indicated.
      • As detailed in the revised WAC 314.55.102(d), end products including “All marijuana, marijuana-infused products, marijuana concentrates, marijuana mix packaged, and marijuana mix infused sold from a processor to a retailer” remained exempt from pesticide screening under an assumption that all intermediate products that comprised an end product had been provably tested.
    • Kildahl noted the length and “exhaustive stakeholder engagement” that occurred throughout the project. He shared the belief of staff that the changes supported the “overarching goal of the board to protect public health and safety” and ensure product safety in the cannabis sector.
    • Beyond changes to testing requirements, Kildahl stated the rulemaking would impact:
      • “Licensee sample collection and storage procedures” 
      • “Increasing the maximum amount of cannabis flower that may be represented by a single...panel of tests”
      • “Revising the number of one-gram flower samples required for testing”
      • Eliminating the ability of labs “to return unused portions of samples to licensees”
      • “Revised guidance to labs regarding when to reject or fail a sample”
      • New information around “testing levels for water activity, potency analysis, foreign matter inspection, microbial screening, mycotoxin screening, and residual solvent screening”
      • “Updated rule language regarding product re-testing, remediation of failed lots, the expiration of certificates of analysis and referencing of samples”
      • “Updated reporting requirements for lab proficiency testing”
    • Conveying that the CR-102 had been presented in December 2021, and that the public hearing had occurred on February 2nd, Kildahl indicated staff had heard “52 written comments and 20 comments” by way of oral testimony. No changes had been made to the CR-103 based on these comments, but he highlighted that a “new subsection (11) was added to WAC 314-55-102 to allow for a transitional period during which post-harvest marijuana products” that weren’t in compliance with the new rules could be “sold, distributed, or both, within a reasonable period of time to be determined by the board.” With board adoption, the rules would become effective on April 2nd, Kildahl added.
    • Postman spoke up to say “we need to do this" as Washington was the last adult-use cannabis state not to require pesticide testing, making it “good we got there” even if the rules were further modified in the future. Acknowledging some people were “disappointed in the final product, I think it’s a good final product,” he said, expressing his commitment to continuing to talk with stakeholders to “keep improving…and to look at what adverse impacts may be out there” as it was implemented. The board voted to adopt the CR-103, and Postman mentioned his hope that accredited cannabis labs were “ready to go” (audio - 2m, video). 
      • Capitol Analysis was recently added to the WSLCB list of labs approved to test for pesticides.
    • Agency staff also prepared an explainer for licensees to be aware of the rule reforms. Though no mention was made about a dedicated work group on the subject which would be established later in the year, the concept was discussed by Postman in the prior day’s Board Caucus and described in a subsequent agency announcement about the new rules.

• Public commenters raised a number of points including the need for social equity, less “favoritism” in enforcement, disagreements between licensees, and a direct accusation against Cannabis Observer.
  • Christopher King (audio - 4m, video) 
    • Interested in cannabis industry equity, King said he was familiar with “zoning and leasing issues” after having worked as a "professional zoning manager" in a “civil rights context, and in a land-use context for wireless carriers.” He commented that licensure was generally understood to grant a business “a bundle of rights, privileges, and immunities, and responsibilities that set you apart” from businesses without a license. However, “a number of Black pioneers” operating medical cannabis dispensaries had been “scared of their jobs and their livelihoods by LCB agents posing as real cops.” He pointed to a deposition he’d taken of former WSLCB Enforcement Officer John Jung in which Jung stated he “would not pull his sidearm because he doesn’t have qualified immunity,” and that he, along with another former officer, David Stitt, “quit the LCB because of that.”
      • King previously commented on his lawsuit against WSLCB during agency BIPOC outreach in 2020. In his federal complaint against WSLCB and agency leaders, he alleged that WSLCB lacks constitutional authority to commission individuals as a limited-authority law enforcement agency for cannabis. Learn more from an August 2021 editorial discussing the case and the case docket, which includes several documents purchased by Cannabis Observer and made freely available for download via Court Listener.
      • Jung gave testimony highly critical of the agency's leadership and enforcement powers to lawmakers during legislative hearings in March 2019 and on January 19th.
    • King mentioned how the American Civil Liberties Union of Washington (ACLU-WA) “did equity for Oscar’s Restaurant, that’s a White guy, German immigrant” who had “lost his license, wrongfully, to the LCB.” Oscar McCoy had a license returned, along with “lost wages, lost profits, [and received] half a million dollars.” He pointed out that ACLU-WA helped individuals who lost their licenses over unpaid tickets. “Meanwhile, they are not responding to any of these Black folks” that were “pushed out of medical” cannabis, King alleged, further feeling that area members of the National Association for the Advancement of Colored People (NAACP) “turns a cold shoulder, the media won’t talk to them either.”
    • King then called out “your buddy there who does the Cannabis Observer, Greg Foster, he tried to threaten me with, with spam for telling him about the fact that LCB admitted that they’re not real cops, that they can’t, they don’t have emergency authority. That’s not spam, that’s fact! And he shouldn’t be using that badge on his page, either. It’s a fake badge that says police on it, police of whom? Police of what?”
      • As we believe transparency is necessary for accountability, here are some facts about the exchange referenced by Mr. King.
      • The first time Cannabis Observer heard from Mr. King directly was in March 2021 when he asked us to “Please cover our LCB lawsuit” which he claimed was “getting some serious body blows in against WSLCB.” We did not reply to his request received via our contact form.
      • In April 2021, we discovered that our email address dedicated to receiving communications from the City of Seattle had been harvested without our consent and included amongst 59 other email addresses on a list constructed by King.
        • We utilize unique email addresses to track their intentional and unintentional spread, and surmised King had acquired it from a City of Seattle communication which inadvertently listed recipients via cc: rather than bcc: in January 2021.
      • Between April 2021 and February 2022, we received 165 unsolicited emails from King to his email list, which had been expanded to 125 recipients during that time.
      • On February 2nd, Mr. King sent an email to his list titled, ‘Quit Using that Damn Shield and "Police" Wording,’ stating, “Pardon my French but God Dammit will everyone PLEASE stop using that badge/shield with POLICE written on it when referencing the #WSLCB.” He linked to a Cannabis Observer post and included a screen capture of the Cannabis Observer website.
        • The insignia Cannabis Observer associates with WSLCB content on its site is the WSLCB enforcement division badge and is not a fabrication.
      • As Mr. King had not provided a means of unsubscribing, I replied to his list, stating:
        • “Please remove our email address…from your list. It's my understanding that you harvested our email address from a City of Seattle email which accidentally sent the recipient list in the clear. As such, we never requested nor opted in to receive email from you. As your messages seem designed to promote your commercial interests, you may be in violation of the federal CAN-SPAM Act of 2003 in my circumstance - and potentially many of the other recipients of messages to your list.”
      • Mr. King replied shortly thereafter to his list, stating:
        • “You at Cannabis Observer of all people and entities who should be interested, and who should be covering the litigation, have the nerve to come at me this way?... Listen buddy our East Coast correspondent is going to be working with entities way above your pay grade and this issue will be noted and discussed... Don't ever threaten me again.”
      • Later that evening, Mr. King forwarded the next message he sent to his list, possibly to confirm that he had honored our request to remove our email address, in which he asserted:
        • “I have left that idiot puppet Greg Foster off of this one. I’m sure his Daddy will tell him I sent this though. Fourth Estate coward bought and sold.”
      • Mr. King has continued to contact Cannabis Observer to encourage us to cover his work.
    • King cited another federal case brought by a licensee in Everett that “was just dismissed last month, making the same allegations.” He said the attorney working the case, Karen Halverson, claimed “arbitrary and capricious and racist actions on the part of the LCB” which contrasted with his reading of “the Widmer case,” a bankruptcy case where the defendant plead the fifth amendment “three times.” He indicated WSLCB’s “own attorney” said “don’t give this guy a license” but the applicant was licensed anyway.
    • King concluded by describing the treatment of some former dispensary owners as “Black guys are out here stuck in the cold, and we’re wandering around here like on a plantation” asking for “scraps from the table.”
  • Mike Asai, Co-Founder of Emerald City Collective Gardens (ECCG) and Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) Licensing Work Group member (audio - 5m, video)
    • Asai believed that medical dispensary “pioneers” in Washington’s Black communities who had been “part of the retail example that you see today” were injured by passage of a 2015 law merging the medical and adult-use cannabis markets, calling it a "takeover" of dispensaries like his which obtained City of Seattle business licenses. He was “highly frustrated” that the social equity retail licensing program to be administered by WSLCB hadn’t accepted any applications to date. Having engaged with agency officials since 2016, Asai stated that he’d found some of their initial behavior “unprofessional,” treating him “like a nobody." He acknowledged there had been improvements at WSLCB since Board Member Ollie Garrett, and others, had gotten involved and started the social equity program. He was appreciative of the contribution of agency staff to task force meetings, and felt the WSLCB was “moving faster than the task force." Asai promised not to let his past “anger get in the way of…moving forward.”
  • Micah Sherman, Raven Co-Owner, Washington Sun and Craft Growers Association (WSCA) Board Member, WA SECTF Licensing Work Group Co-Lead and appointee representing licensed processors (audio - 5m, video) 
    • Sherman shared his perspective that the CR-103 just approved by the board would “severely impact" smaller operators like himself who produce many cannabis cultivars while helping “very large operators that are producing very large batches of products.” He hoped to see the new rules remedied in their implementation.
    • Sherman was eager for the Washington State Department of Agriculture (WSDA) to receive a proposed budget proviso so staff could complete an “organic standard” for legal cannabis which was first approved in 2017.
      • The latest draft of the senate budget bill, SB 5693, includes the $200K proviso to WSDA.
    • Sherman turned to past assertions from agency officials that they didn’t “pick winners and losers” in the industries they regulate. He asserted that their rulemaking and regulatory decisions amounted to choosing “the shape of the market…and we inherently pick winners and losers because we’re selecting the landscape that the game that we’re participating in is being played on.” Hopeful the board would “accept and acknowledge" that their choices, whether intentional or unintentional, determined outcomes for licensees and applicants, Sherman pointed out that individuals and businesses who could afford lobbyists to represent their interests were far more likely to achieve a policymaking outcome “that benefits them.” He encouraged rule and policy development going forward to recognize they impacted businesses like his, which “succeed and fail” in part because of choices made by the board.
  • Kevin Shelton, Lifetree Collective (audio - 3m, video) 
    • A former dispensary owner, Shelton said his business began in 2011 and had been registered with the Washington Secretary of State (WA SOS) and Seattle government, having no issues with them until “we were asked to leave” in 2015 under threat of “the feds being involved and a lot of other stuff.” He noted the social equity program had been established in 2020 but there still hadn’t been any licenses issued. Shelton felt there were “games being played” and that the “Black founders of cannabis” were excluded from “what we helped start” and should be guaranteed a retail license under a “grandfather clause.”
      • Shelton set up a Change.org petition “demanding justice & fair redress from Federal & State Governments for these entrepreneurs that were destroyed and inclusion for up-and-coming ‘African American’ entrepreneurs that would like to enter this lucrative market.  Help us get back our ‘Green Wall Street’ where we once had prosperous businesses that enriched our communities.”
  • Ally Damon, Ruckus Manager (audio - 4m, video) 
    • Damon explained a conflict she was having due to an agency “refusal to enforce its own regulation regarding retail license forfeiture.” She said her organization’s situation was impacting consumers, causing the state to miss out on “millions” in tax revenue, and keeping licenses from being reissued to social equity applicants. Damon described another retailer that moved to Belltown years earlier but “had not opened” in violation of forfeiture rules. She alleged the license holder had picked a location “unfit for retail” and was simply inactive, yet their business blocked Ruckus from being licensed in the area. Damon asked the board to take action.
    • Postman encouraged her to send additional information on the business’s situation in writing (audio - <1m, video).
  • Jim MacRae, Straight Line Analytics (audio - 5m, video) 
    • MacRae commented on the newly adopted rule changing “quality assurance to quality control” which he felt played into “the preferred segment of your licensees within this space, which is the big ones.” He suggested there were aspects of WSLCB rulemaking and development of agency request legislation that hurt “the type of wholesalers…that I would have liked to see more prominent in this industry.”
    • Pointing to an editorial in the Seattle Times published that morning which conveyed the views of the Washington CannaBusiness Association (WACA) on legislation to reorganize and expand the board, MacRae considered the concept to generally be “a hostile move by WACA for a couple years now.” However, he conceded some relevant issues had been raised, namely the sway the agency had over the billions in sales and hundreds of millions in tax revenues from cannabis, which represented “a lot of power” in the hands of a small group of civil servants. “If you could corrupt two people on the board,” he posited, the result could be “so much money involved” for those successful at driving policy.
    • The article also accused the board of “heavy handed enforcement” despite progress on enforcement reforms, MacRae stated. Skeptical that this was the case, he was more inclined to believe in the existence of "inconsistent favoritism [of] certain aspects of those rules." Mentioning lot sizes for testing, he commented that the revised rules were “devastating” for smaller tier growers. And he briefly questioned a staff policy on measuring cannabis plant canopy published on January 21st, claiming it was a “ridiculous” process.
    • MacRae closed with a warning: “WACA’s coming after you, don’t know what it is, but they want more money and you’re not giving it to them.”
  • Sami Saad, a former dispensary owner, signed up to comment but was unavailable when called. 

• Chair David Postman responded to many of the comments he’d heard, insisting staff remained committed to growing social equity in the cannabis sector, weren’t showing regulatory favoritism, and wanted legislation on cannabinoid regulation passed (audio -  13m, video).
  • To Asai and Shelton’s comments on social equity, Postman said that staff were working to get rules in place so they can start to process applications “by the summer.” He assured them that officials would be keeping track of those who had offered comments and they would be notified, “‘cause we do want to hear from people who’ve been in this business a long time.” Postman remarked that he’d “never heard anything” from licensing staff besides a "sincere committed belief" in the “goal of social equity,” whether at WA SECTF meetings, in the legislature, or at the agency.
  • Regarding “picking winners and losers," he found Sherman’s feedback to be “incredibly timely right now” as Postman felt it was an argument being put forward by many stakeholders who “don’t agree” on who benefits from WSLCB decision making.
    • He said that “the folks that you think we’re picking have said in writing that we’re picking you guys over them…and that’s one of the reasons why we need to be reigned in.” Postman viewed macro systems like capitalism, republic governance, and the popular vote, as inherently leading to “structural things” within which WSLCB staff operated as regulators. He considered the wording of Initiative 502 to have been “mindful” of the regulatory impacts on different license types, or against vertical integration of cannabis.
    • Postman hadn’t witnessed “evidence of favoritism on the regulatory side,” and found those accusing the agency of that were “pointing at each other…all convinced that we’re helping the other guy.” He felt the agency had done well in “trying to balance those interests" in relation to various organizations with public relations “operation[s]...or who has political connections, or who can pack a hearing room.” Postman took umbrage at the suggestion that WSLCB had failed to “modernize,” saying “I think our rulemaking process alone is a dramatic modernization” by any standard for Washington’s government.
    • Rather than trying to please everyone in the cannabis industry, he was content to focus on regulating the industry to “protect the public” and respect the will of voters and the legislature, not just see that businesses succeed.
  • Looking at the legislative session, Postman was deeply concerned lawmakers wouldn’t act on pending legislation like cannabinoid regulation because “there's just not time…I think that's really unfortunate."
    • He reported that there’d been conversation about having the governor issue a "health emergency declaration," but that so far “there is no health emergency today, we are ahead of it.” As there had been no updated data on adverse effects since the health advisory issued by the U.S. Centers for Disease Control and Prevention (CDC) in September 2021 on delta-8-tetrahydrocannabinol (delta-8-THC), Postman found that “some of the industry publications have belittled that” but he was confident the risks were real, especially with products being sold in stores without age restrictions.
    • Postman expressed concern about the presence of synthesized cannabinoids in both legal cannabis and less regulated hemp products. He pointed to a February 22nd U.S. Hemp Roundtable statement on the issue which recollected the slogan “rope not dope" was used in advocating for hemp to be legalized federally. Postman considered that a “red flag” and noted Hemp Roundtable leaders considered the chemical conversion of hemp extracts into impairing cannabinoids violated “the intent of congress," which “clearly violates the intent [of] the Washington State Legislature, as well.”
    • If the legislature failed to pass legislation empowering WSLCB to regulate synthesized cannabinoids, then "we're going to have to look at everything we can do," Postman commented. He stated that the National Cannabis Industry Association (NCIA) claimed there were “some potential benefits from these new compounds,” but still called for “more years of research." Postman added that since SB 5983 was “the one bill that's really alive," he hoped it got “serious consideration” by lawmakers and was passed, which would start WSLCB rule implementation and “conversations across industry sectors."
    • For people concerned about the future of the cannabis sector, he encouraged them to consider “how to all work together on this” because when legislators encountered “information wars” from stakeholders over legislative proposals, they were less likely to take any action.