WSLCB - Board Meeting
(April 13, 2022)

Wednesday April 13, 2022 10:00 AM - 11:00 AM Observed
WSLCB Enforcement Logo

The Washington State Liquor and Cannabis Board (WSLCB) convenes a meeting of the three-member Board every two weeks to consider formal rulemaking actions and hear public testimony.

CR-102

CR-102

https://lcb.wa.gov/boardmeetings/2022apr_schedule

Observations

The board received a high level briefing on cashless payment options for retailers, approved filing proposed social equity program rules, and heard several critical public comments.

Here are some observations from the Wednesday April 13th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

  • In a cannabis retail safety briefing, Chief Financial Officer (CFO) Jim Morgan talked about cashless payment options for stores before Enforcement and Education Director Chandra Brady spoke to other security efforts.
    • Following a pronounced increase in cannabis retail robberies in 2022, the agency hosted a panel on the topic on March 29th where Board Chair David Postman promised to see what regulators might do to thwart the crimes.
    • Cashless Payment Systems (audio - 7m, video -  TVW, video -  YouTube).
      • Morgan told the board “first and foremost, they exist in the industry…they are serving some licensees,” but others did not know “they are available" and “supported and compliant with our rules.” He’d first encountered a vendor in 2017 “that wanted to do business with our retailers, and it was not clear by our rules” at that time the practice was allowable. Morgan described a rule “adopted by the board in 2018 to set the guidelines for what was appropriate for cashless payment systems.”
      • Morgan said he’d participated in a meeting convened the previous week by the Washington State Office of the Governor (WA Governor) with staff from the Washington State Department of Financial Institutions (WA DFI), “banks, credit unions, industry members,” as well as several vendors. He found that many licensees were unaware of the services, or had an incorrect “perception, largely, about the cost of those systems.” Transaction fees were “fairly comparable to transaction feeds for…credit card acceptance,” Morgan stated. His impression was that with federal legalization, once “banks and payment card systems are able to participate in the industry more freely, those will be normal costs to business like any other…retail operation has.” He described other ideas presented in the meeting as “either not currently possible, or would take a very long time to implement,” whereas he was convinced “the reality is [service options] are already there."
      • The current focus for Morgan and other agency staff was “on education" for the cannabis sector about what was available. Beyond raising awareness about compliant options, he said staff wanted to avoid a “conflict of trying to promote private businesses.” Without signaling a preference for a private entity, Morgan promised to inform licensees there were “systems they can use to reduce the amount of cash in their business.” Moreover, officials reviewed existing rules and found retailers could display “branded signage for the…particular provider that they use.”
      • WSLCB staff would be “coordinating our messaging” with WA DFI, Morgan told the board, and amplify educational information on their website indicating services were compliant “with their rules and regulations.” The Washington State Department of Labor and Industries (WA LNI) was also going to contribute to the campaign, given the workplace risks and “fatalities,” he added. 
      • Morgan finally noted that, to date, media coverage of robberies emphasized the cash-heavy nature of many retailers, commenting that they also wanted to “change that perception” in reporting on the subject. He cited an article on one retailer that began using a service as a positive development that could help “turn the tide a little bit” on a “critical issue.”
      • Postman asserted existing vendors were still “not as convenient” as using a credit card and required “extra steps” for customers, like use of a dedicated application to make purchases. He asked if there were other regulatory barriers “stopping those companies from doing that in any other way?" (audio - 4m, video -  TVW, video -  YouTube)
        • Morgan said cashless automated teller machines (ATMs) had been attempted to “skirt the rules” but were “found to be problematic as well.” These practices typically involved national companies with concerns that cashless ATMs “obscures the fact that they’re actually using [a transaction] to purchase marijuana,” he warned. Conversely, withdrawing cash from an ATM in a retail store remained a convenient option for many customers, argued Morgan. Cashless payment service providers would “always be fighting the convenience factor” of using a credit or debit card at an in-store ATM, he said, though rules did allow for “incentives/discounts for using these” systems. Morgan felt use and promotion of these services by retailers, even as they weren't the “best option for customers,” was the main path to reduce money on-site.
      • Board Member Ollie Garrett asked about using an application like CashApp for purchases. Morgan responded that “something like that” could work, but CashApp and PayPal had not participated in the cannabis industry to date. Some payment services attempted to “mimic” popular applications, but still required individuals to download an app, set up an account, and use the program in stores (audio - 3m, video -  TVW, video -  YouTube).
      • Postman mentioned a vendor that had people “buying Bitcoin, which then is transferred” for purchasing, but nothing “simple” had come to light as a solution for major credit card providers’ “inability to engage in this.” As for “incentives for customers” to use payment options besides currency, he wondered about possible "cascading incentives" for financial institutions and licensees to implement cashless options - then for customers to use them. Postman promised that staff would continue to look at what services existed and inform cannabis businesses without showing preferences for, or contracting with, a particular company (audio - 3m, video -  TVW, video -  YouTube).
    • Cannabis Retail Security (audio - 2m, video -  TVW, video -  YouTube). Postman mentioned that Brady had been part of a meeting the day before between “some retailers" and law enforcement representatives, and was “deeply engaged” in the topic.
      • Brady described how her division had been working with “partners inside and outside” the WSLCB to give “support, information, education.” Together with the agency’s communications staff and “general law enforcement in the communities and jurisdictions in which these robberies are occuring,” Brady said officials shared “recommendations and best practices.” Staff had been doing “training within the LCB” and working with agency finance staff to give “options for supporting licensees in the way of training or possible security assessments and recommendations” in addition to communication with WA LNI staff about employee safety efforts. Brady reiterated that her division’s enforcement and compliance staff remained available to consult with “and support” any licensee.
      • Postman recognized "all of this costs money" and expenses fell to retailers. He indicated a police detective he’d spoken with highlighted the benefit of good security cameras, and wondered what agency leaders might do to “bring that knowledge door-to-door.” Brady responded that staff were reviewing whether there was money the agency could spend on security assessments and advice to licensees, as well as whether it was most appropriate to “come from us” or area law enforcement. She highlighted that police in Tacoma, Bellevue, and other jurisdictions in western Washington were engaging proactively with local cannabis businesses (audio - 2m, video -  TVW, video -  YouTube).
      • Postman responded to earlier comments about tax incentives to support businesses investing in security changes, saying he’d encountered no opposition to such an incentive, but that it would need legislation to enact (audio - 1m, video -  TVW, video -  YouTube).
      • Brady called attention to feedback about things "outside of our control" like sentencing and prosecutorial decisions, but Postman doubted that was an “issue” WSLCB should lead on (audio - 1m, video -  TVW, video -  YouTube).
      • Postman asked how “the temperature is right now" and common concerns from licensees. Brady said “education contacts went up 78% last month” and her staff were fielding policy questions regarding what businesses were allowed to do (audio - 2m, video -  TVW, video -  YouTube).
  • Public commenters cast aspersions on the agency’s culture as a whole and the integrity of a board member, leading to a rebuke of the allegations and defense of the “new path” towards equity.
    • Sami Saad, former dispensary owner (audio - 6m, video -  TVW, video -  YouTube)
      • Saad was welcomed to speak by Postman who nonetheless asked that Saad “refrain from talking about people’s religion, if possible.” As Saad had raised others’ faith as a talking point before, Postman made a “plea to you, yet again, that this is not the place” (audio - 2m, video -  TVW, video -  YouTube).
      • Saad began by saying he didn’t “discriminate against Jewish, but…the first medical weed shop just came recently, after 2014” and that store, Cannabis City, was owned by someone with Jewish heritage, as was another licensee “right next to me.” He insisted that while he “loved” Jewish people, he didn’t feel “White” people of that faith should have been granted a cannabis license before him. Saad felt “disrespected.”
      • He then claimed Garrett’s staff “never call me” after he’d reached out, and that she’d “disappointed” him by asking that he not contact her. Saad then alleged that Garrett allowed a personal relationship to influence WSLCB approval of a cannabis retail license. Suggesting her relationship had been public knowledge, he claimed it wasn’t “an accusation” for him to infer impropriety in how the individual’s license was handled by the agency, but offered no further evidence. Postman said he wanted to hear Saad’s thoughts, but not accusations, to which Saad commented that Postman was “from a Jewish community” and Saad respected that. He returned to accusations of favoritism based on people’s past associations with board members or ethnic and religious affiliations without offering corroborating information. Claiming he and another Muslim businessman named “Kevin [Shelton]” should be licensed by WSLCB, he insisted that people in his community and some social equity stakeholders agreed his being licensed was a matter of “fairness.”
      • Saad’s last allegation was that some cannabis retail robberies were because “a big protest [of] Uncle Ike’s, they came multiple times, they said ‘if you guys do not give those Black people their license…they gonna rob those store.’” He felt regulators “caused this, and you caused damages,” encouraging an investigation into the matter and to seek comments from a “Kenny B….Jenon, or whatever his last name is.”
    • Christopher King (audio - 5m, video -  TVW, video - YouTube)
      • King stated the agency had a “documented history of being arbitrary and capricious" according to a “Cornell School of Law and Public Policy research that was done with…your favorite cannabis firm here, Miller Nash.” He said arguments in his federal lawsuit against WSLCB leadership reinforced the Cornell report. King relayed that he’d personally interviewed WSLCB Senior Licensing Specialist William Clark who affirmed “that it’s arbitrary and capricious and racist, OK?” Having worked on civil rights cases for “Ted Mearns, who was a preeminent civil rights professor, law professor,” he was confident he’d forgotten more about civil rights law “than any of you will ever know, and that’s a fact.”
      • King chided Postman’s earlier plea that Saad avoid references to people’s religions: “unless he’s making hate speech, you can’t really restrict what he says.” While King himself might not make allegations of preferential treatment based on ethnic affiliation, “you can’t stop him from saying it.”
      • “We have it on information and belief, from very respected sources, that if you’re allied with me, you won’t get a license,” King said, something he was convinced was unconstitutional since it was a “government program that’s being enforced or set out.” He warned the board and staff to “watch it,” as he felt they could be liable “under 42 U.S. Code 1985” and he wanted his “people to get fair respect when they go for their licenses in this new program.”
      • Using a “civil rights rubric, or framework of analysis,” King said there needed to be “a compelling governmental interest,” which applied in the circumstance of cannabis equity intended “to help the Blacks, predominantly, who started this industry.” He suggested businesses operating publicly when state agencies “were still busy discriminating against them” had “defined the market for legal cannabis.” King credited Libby Haines-Marchel as “the only Black person we know of…to pass through the gauntlet, and then they took it from her after she passed.” He commented on other licensees “your attorneys identified as basically crooks.”
      • King requested the board prioritize African American equity license applicants that had operated medical cannabis dispensaries, and then “filter out the rest to other people who were in medical at the time, and the Johnny-come-latelys come last, OK.” 
    • Libby Haines-Marchel, Former Owner of Rock Island Chronics (audio - 6m, video -  TVW, video -  YouTube)
      • Saying she’d been “trying to figure all this stuff out," Haines-Marchel described having been part of the cannabis industry “starting in 2012…when they first introduced” Initiative 502 as a “regular mom” who didn’t have “a whole lot of money.” She’d been excited for the business opportunity after having seen “so many Black people go to jail over marijuana” and believed she could pay for her sons’ college education with a successful store.
      • Haines-Marchel explained that she’d gone into debt just to follow the process and “to make sure that I did everything right.” Tearfully, she observed that “the only thing I didn’t have was a whole bunch of money,” and that social equity conversations about helping “Black people get into the industry” were nowhere to be found “at my time, at all.” She was included in the license lottery process after taking her application packet to the WSLCB office in person, only to be subsequently denied because “the person I was married to had a criminal history.” Haines-Marchel asserted that she had “begged” agency officials for understanding or even greater scrutiny for her as a licensee.
      • In 2020, Haines-Marchel said she’d learned about the equity program and changes made for “the same reason why they denied me my license…that rule doesn’t exist” anymore. She believed that she deserved a license, and should “be first on the list" in equity licensing since she’d fought them “all the way to the [U.S.] Supreme Court.” Haines-Marchel told the board that she and her children had been “damaged” by not getting a cannabis license, and she’d no longer been able to “trust the system.”
      • Postman assured Haines-Marchel that “before this year is out" there would be a new application process “that you say you want,” in part because of the CR-102 they’d advanced that day. Though he couldn’t put Haines-Marchel’s application “at the top of that list,” he insisted the scoring process would cover “many of the things you just talked about.” Postman suspected the program might not be “everything you want" but it was an improvement over the application system she’d endured (audio - 8m, video -  TVW, video -  YouTube).
        • Marchel wanted to know “about righting the wrongs," claiming she had “proof” WSLCB staff “worked with folks and helped them get licenses.” As she’d already “put in the work,” the only way “to do the right thing" was to get her a cannabis license. Postman said things still had to be done “within these rules" that were under development and there would be WSLCB representatives to work with her, but anything beyond that would lead elected officials to “yank… our authority back in a second." He added that the board had done what it could to listen to community complaints and be proactive. While not “perfect” or as “timely” as many wanted, Postman said it remained to be seen who would get one of the “dozens of licenses” available. Haines-Marchel felt the distinction was that other people were “invited” to contribute and get involved, but she "wasn't invited to the party" and had already taken a chance “almost ten years ago.” She asserted that her attorney had offered to work with agency officials during her suit against WSLCB, agreeing regulators could “police her” if she got a license.
        • Finding that her race and her husband’s history were the obstacles to opening her business, she asked the board to imagine how that would feel. Haines-Marchel worried about the example being set for her sons, fearful “it’s already likely they’ll end up in jail and in prison.” Postman responded that despite its limitations, the social equity program was “the only option in front of us" that could get her a cannabis license. He also felt there were clear admissions from Washington state and agency leaders “on the disproportionate impact” of the “failed war on drugs.” Postman asked Haines-Marchel to give WSLCB representatives one more try.
    • Peter Manning, Black Excellence in Cannabis (BEC) member (audio - 5m, video -  TVW, video -  YouTube)
      • Manning said there’d been a “frustration in my community because…these stores are predominantly owned by White people” and predicted tension “with our people.” In 2016, he reported having met with former Director of Legislative Relations James Paribello, and claimed Paribello said “the meeting was a real eye opener for me, I realized that based on institutional racism of socioeconomic factors…well beyond the scope of the LCB’s jurisdiction,” that African American “operators had trouble finding capitalizing partners, and legal representation to overcome the…bureaucratic barriers to apply.” Manning commented that he’d brought up lagging “Black participation” in the industry in 2015 and had expected to see “these White stores in our Black neighborhoods.”
      • Saying the “elements” of systemic racism remained within WSLCB as an institution, Manning saw no guarantee that “this same thing is not going to happen again,” especially as he considered the proposed scoring rubric for applicants “extremely flawed.” He advised having it more targeted to help “people that were affected by the war on drugs.” He alleged some “predominantly White-owned stores, they weren’t even transparent in their application process to even qualify for the stores that they have now.” Manning noticed that “when Black people or Brown people were done wrong, it’s a super long study session when it comes to making” wrongs right. He asked for more targeted meetings with “the Black community” in Washington.
      • Mentioning how BEC helped draft the state’s social equity legislation, Manning credited Garrett as “being real supportive of the Black community” and doing “a good job.” He didn’t believe the social equity program was about “favoritism” and couldn’t fathom why Garrett was taking flack when “so-called Black people [didn’t] attack the people that were there prior to Ollie Garrett, like I did in 2016.”
    • Kevin Shelton signed up to speak but was unavailable when called upon.
    • Postman thanked Manning for his comments as he viewed Garrett as having “done more than any single person to move the ball” on social equity and kept staff at WSLCB “accountable” for the results. He didn’t see a way to “guarantee it will be different.” Their program could result in litigation, “from one side or the other, or both,” but he believed “we are in a better place than we were” before the social equity program. Postman called their scoring rubric the “best, legally sustainable system out there" and while many had spoken to the board and staff about “the need to do more and more,” he also encountered individuals who didn’t want anything more done to make the cannabis sector more equitable. “What we’re trying to do is get that progress here,” he said, but he couldn’t promise any specific result. Postman asked people to “give this system a chance. It's a new path," even as he lamented that “people make a lot of allegations” against the integrity of the board and agency representatives, admitting it was “lost on me…what being Jewish has to do with any of this” (audio - 4m, video -  TVW, video -  YouTube).
    • Garrett commented that she’d “been very transparent" with the governor’s office and agency about her affiliations, and that when there had been a need “for me to recuse myself from any conversation based on anything to do with my personal life, those recusals have taken place” (audio - 1m, video -  TVW, video -  YouTube).

Engagement Options

Webinar

https://teams.microsoft.com/...2%3a%224bb5cd1e-4347-4ae1-b13b-813c9fbc89c0%22%7d

Livestream

https://www.tvw.org/watch/?eventID=2022041087

Phone

Number: 1.564.999.2000
Conference ID: 975 874 499#

Information Set