WSLCB - Board Meeting
(September 14, 2022)

Here are some observations from the Wednesday September 14th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 5 takeaways:

• The signing of a cannabis compact with the Spokane Tribe of Indians concluded what may have been the longest such negotiations undertaken by WSLCB (audio - 12m, video, Compact).
  • On August 30th, the board approved the 21st tribal compact on behalf of Washington State with the Hoh Tribe. Tribal Liaison and Director of Legislative Relations Chris Thompson explained a key sticking point in negotiating that compact had been “the comma,” contested punctuation in statute which the Washington State Office of the Code Reviser (WA CRO) added but agency officials chose not to recognize. In the opinion of agency staff, the absence of this comma limited the tax exemptions for cannabis which tribal governments could claim. But with passage of HB 1210 in the 2022 legislative session, “technical corrections” identified in the final bill report included “correcting scriveners' errors,” resolving the issue without public acknowledgement of the impact by WSLCB staff.
  • During the meeting, Thompson started off by explaining that as “interim” tribal liaison in 2018 there had been “a number of conversations and efforts with the Spokane Tribe around a cannabis compact,” earning the effort a proverbial “endurance award” owing to the longevity of the negotiations. He credited Spokane Tribal Chairwoman Carol Evans for reaching out to Board Chair David Postman and others, “instigating some really productive conversations.” 
    • Describing the compact as “in the mainstream of most of what has come before,” Thompson said that provisions on “dispute resolution” and the use of binding arbitration were newer and less common in prior compacts, and similar to the Hoh Tribe compact. A difference between the resolution processes in the compacts he identified was wording around the “use of law and remedies” as well as “the template provisions on the defense of the compact” if challenged by a third party. Thompson pointed out the compact also defined “questions of law…as a legal issue, the resolution of which requires the interpretation or application of legal authority and which, were the issue presented to a court, would be within the sole province of a judge to resolve.”
    • Thompson reviewed “the comma issue,” and how it was a “breakthrough” for HB 1210 to add the punctuation into law. WSLCB recognition of a third tax exemption related to cannabis “grown, produced, or processed within Indian Country, regardless of who the customer might be,” had been “hugely helpful” in letting regulators “more fully recognize tribal sovereignty,” he remarked.
    • The compact allowed the Spokane Tribe to enter into “retail, production, and processing activity” without permitting drive-through sales, as Thompson commented it was “repeatedly” raised as a concern by federal prosecutors. It also moved wording to “cannabis,” rather than “marijuana,” in keeping with HB 1210.
    • According to Thompson, an item he realized too late had “slip[ped] through the cracks” were “obsolete references to the state traceability system” rather than the Cannabis Central Reporting System (CCRS), which had been causing difficulties for tribes since the switchover at the end of 2021. He added that “the staff recommendation here” was for “the board to authorize correcting of those obsolete references” and then sign the revised compact.
  • Postman introduced Evans who talked about the history of her people and praised the patience of WSLCB representatives, specifically the way Postman had “listened” to her in a “transparent” dialogue that led to “consensus building.” Expecting the compact would help “our people plus the people in the community,” she asked for the board to approve it (audio - 3m, video).
  • Postman was also grateful to Evans, and happy that the compact could help the Spokane Tribe’s “continuing economic development” and the government-to-government relationship he’d been a part of since serving Governor Jay Inslee (audio - 1m, video).
  • Board members agreed to approve the compact with the traceability revisions requested by staff. Postman thanked staff and attorneys from both sides, then pledged to sign the compact and “get it over to the governor’s office for his signature as soon as we can” (audio - 1m, video).

• Policy and Rules staff provided brief updates on a few open rulemaking efforts before choosing to withdraw the project on cannabinoid regulation, leaving the matter to state legislators.
  • Canopy (Rulemaking Project) and Advertising (audio - 2m, video, Rulemaking Project).
    • Each opened by the board on August 31st, Policy and Rules Manager Kathy Hoffman explained that it was early on in the “large and very complex” rulemaking projects, and that they would use differing outreach models that would “center equity in the work.”
    • The canopy project would follow a “world café model” to “explore topics” around the rules “on the afternoon of [Sunday] October 2nd…to provide a space for all licensees” where they can “share ideas and thinking about what is working, what isn’t working” and the “pathway forward.”
    • Staff planned to take a “more workshop oriented approach” on the advertising rulemaking project, drafting conceptual rules and soliciting feedback from stakeholders “rather than [reviewing] section-by-section as we have with our listen and learn model in the past.” The first such meeting was forecast to be in “November, if not sooner.”
  • Contact Information (audio - <1m, video)
    • After having been “filed on August 17th,” Hoffman said the project was progressing under expedited rulemaking and “we haven’t received any comments to date.” With no public hearing required, she previously expected to present a CR-103 asking the board to adopt the changes on October 26th.
  • Cannabinoid Regulation (audio - 3m, video, Rulemaking Project)
    • DeSpain described how the rulemaking project to modify WAC 314-55-560 was being withdrawn. He noted a rule change enacted February 5th “defined the terms, ‘additive,’ ’solvent,’ ‘ingredient,’ and ‘compound,’” and pointed out that agency request legislation, HB 1668, with “additional definitions around production and processing of cannabis products” hadn’t been adopted during the 2022 legislative session. 
    • Although a CR-101 had permitted staff to explore adding, removing, or changing definitions in WAC 314-55-010 as well as 314-55-560, DeSpain reported the “totality” of comments received both in writing and by speakers at a July 28th listen and learn forum led staff to “find that additional definitions related to the production and/or processing of cannabis producer should be introduced through legislation.” 
    • Board members approved the withdrawal without further discussion (audio - 1m, video).

• Policy and Rules Manager Kathy Hoffman relayed the implications of turnover on her team in the coming month and progress on hiring replacements.
  • Hoffman announced the “significant” changes to her team (audio - 2m, video).
    • Policy and Rules Coordinator Audrey Vasek “accepted a position as counsel with the Office of Program Research for the House of Representatives.” Hoffman relayed that Vasek’s last day at the agency would be September 30th and was hopeful everyone at the agency could “thank her for her contributions” on many “complex rules projects.”
    • Additionally, Policy and Rules Coordinator Robert DeSpain would be leaving for more “law-focused work” on October 15th, Hoffman said, and expressed gratitude for his work on the rules team.
    • Requesting a moment of “personal privilege,” Hoffman opened up about her “mixed feelings” about losing colleagues which she rationalized as an “affirmation” of her cultivation of an environment at the agency “where people can grow.” Wishing them both the best, Hoffman reminded Vasek and DeSpain there were ways to follow the activities of their soon-to-be-former co-workers and the board.
    • She added that “we’ve started recruiting for these positions” and believed they could begin interviewing candidates “in the coming weeks.” However, reduced staffing meant that there would be “about a one or two month delay” for recent rulemaking efforts begun via petition. She was optimistic that they’d be “quickly regaining our momentum” around rulemaking. 
  • Postman feigned disappointment in having “staff that wants to grow” professionally before sincerely thanking them both for their “precise work.” He was less confident that they’d continue following WSLCB given their new roles and responsibilities (audio - 1m, video).
    • The sole remaining member of the Policy and Rules team was Jeff Kildahl who had typically handled cannabis rulemaking projects.

• A public hearing on the social equity rulemaking project resulted in only a few comments about the desire for greater license portability.
  • Hoffman went over the “technical background” of the project which was filed in October 2021 (audio - 2m, video, Rulemaking Project).
    • A listen and learn session had been hosted by WSLCB staff on March 23rd preceding the development of their initial proposed rule language which was withdrawn on May 11th.
    • Revised proposed rules were approved by board members on August 3rd following an extended period of research and revision by staff. 
    • There were “a couple of typos” in the document which were considered “non-substantive” that would be amended before rule adoption.
  • Peter Manning, Black Excellence in Cannabis (BEC) member (audio - 3m, video).
    • “We are pleased to move forward with the LCB on these” rules, Manning stated, though there were “concerns about mobility” of social equity licenses in addition to “certificate holders, we’re not sure exactly how that will apply.” He viewed a “positive side” in the rulemaking being that the agency, “under the leadership of David Postman, has really taken a turn” and was “reaching out to the community.”
    • Manning considered equity policy in the state to still be in the “feeble stage,” meaning regulators need to “be careful of what we pile on top of it” because “the more we put on it, the less likely it will succeed.” Reiterating a concern for the portability of equity retail licenses between jurisdictions, he asked they not be limited to the county where they were allotted. Manning encouraged more analysis by stakeholders and staff so that the resulting program can “work for everybody.”
      • The rulemaking proposal would only allow relocation of equity licenses within a county. However, draft request legislation from agency leaders would permit mobility anywhere in the state if adopted.
  • Mike Asai, Emerald City Collective Gardens (ECCG) Co-Founder and BEC Vice President (audio - 3m, video)
    • Agreeing with Manning, Asai found license portability was “a big issue going forward.” He thanked Board Member Ollie Garrett and others for their advocacy on the issue of equity in cannabis licensing. Remarking it would “look bad” to approve equity licenses that weren’t mobile statewide, Asai said “however it could be done, lets get it done.”
    • He saw progress on social equity as a “common goal,” and expressed interest in a statement he claimed Governor Inslee made about “mak[ing] some changes within LCB.” Asai then said Director Rick Garza “was here in a time that things were bad and I believe he’s also still here to make things right” - and promised to “hold him accountable.” Wanting no more delays, he asked for additional cannabis licenses “for equity, or equality.” 
  • Shawn Curtis (audio - 2m, video).
    • Understanding that licenses would be available for those with “non-violent drug offenses” like himself, Curtis supported the rulemaking and requested help applying for an equity license. He also claimed he was “working with a few of the state senators to set up a delivery service for cannabis” to help medical patients and as a way to “minimize the people that are intoxicated” while driving.
    • Postman promised that someone from the agency could contact Curtis by email to “help with that,” noting that the proposed rules would be adopted “probably at our first meeting in October.”

• Public commenters had problems with technological limitations of the Cannabis Central Reporting System (CCRS) and alleged failures to respond to public inquiries and records requests involving past license applications.
  • David Busby, OpenTHC and WeedTraQR CEO (audio - 4m, video).
    • Busby praised CCRS as a policy, “but I don’t like at all the technology behind how CCRS has been implemented.” His company was one of the software integrators which received a “show and tell from the LCB” as CCRS prepared to launch, and he had “raised a bunch of issues with the system” which he found “continued to play out, daily.” Having heard “we know best” from WSLCB staff, Busby found their concerns weren’t addressed despite “cracks in the system.”
    • He pointed out that the previous traceability software had been a “real time” system, but under CCRS “we have to wait days for any confirmation or rejection” of reporting, a “design flaw” integrators had identified previously. “And now the LCB is saying waiting for days…is a normal part” of the design of CCRS. Real time application programming interfaces (API) were “widely deployed,” said Busby, who had become convinced that WSLCB staff were “still living in 1996.”
    • “The critical license details are now simply not available in a timely fashion,” remarked Busby. Any modification or change in status of a cannabis license had been known instantaneously, he asserted, “and now this information is needlessly delayed by LCB policy,” accessible weekly, “maybe.” These delays filtered down into delays on “legally required paperwork” between cannabis businesses and with the agency, he added. Furthermore, if the data couldn’t be delivered in a “timely fashion so that the integrators can have it in their systems,” he called for better training by the agency so licensees or their designees had “their trade name, and this license code, and their address, and their email, and their phone numbers” to give integrators.
    • Busby reiterated that the policy behind CCRS was “a good move,” but the implementation of CCRS “ignored the integration partners that you had for the five or six years.” He called for a reformed CCRS with “real time feedback, timely information,” and better leveraging of the expertise of businesses like his. Busby concluded with a note that he was still agreeing to test CCRS updates anticipated in the near future.
  • Sami Saad (audio - 5m, video).
    • Saad last spoke before the board on August 31st.
    • He started off by referencing “Paula Saldana”---meaning either Senator Rebecca Saldaña or Paula Sardinas, FMS Global Strategies President and CEO and Washington Build Back Black Alliance (WBBBA) founder— to say he’d been told “I can help you, but you have to stay away from Christopher King, and Kevin Shelton, and Libby [Marchel, former owner of Rock Island Chronics]…and don’t talk about Ollie Garrett, I’ll help you.” He felt misled and disrespected and claimed “Paula Saldana” had swore at him on a phone call with Shelton.
    • A former dispensary owner, Saad felt agency leaders “should respect us and give us what you guys been taking away from us.” Wanting to get a retail license, Saad described fighting the agency “by law” and felt Postman had helped other communities, but not his community. He alleged Manning had already gotten a cannabis license due to favoritism from Garrett and that he’d also been promised a license if he supported BEC members and the passage of HB 2870 to create the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) in 2020. Saad saw “a lot of corruption in this” and hoped other officials started investigating why some license applications had been approved, but not his. 
  • Christopher King (audio - 5m, video).
    • On August 3rd and August 17th, King and Shelton named Vincere's Compassion Club and the Red Barn Trading Post as unlicensed cannabis markets and wanted to know why the businesses had been allowed to operate. Both locations were raided by WSLCB Enforcement Officers on August 30th, though the agency didn’t acknowledge this publicly until a September 2nd press release which cited “multiple public complaints” as a basis for their involvement.
    • King first talked about a connection between Garrett and others including Jim Buchanan involving the awarding of a license for Emerald Haze. He claimed BEC Founder Aaron Barfield had criticized Buchanan as “the worst partner he’d ever had.”
      • Emerald Haze was called “the only majority black-owned store in Washington” by Barfield in remarks to the board in 2019 when he named Buchanan as an investor in the business. In 2020, BEC filed a federal lawsuit against the U.S. Department of Justice, Inslee, and the WSLCB over alleged administration of “an unconstitutional and unlawful system of Marijuana regulation and licensing.”
    • King opined that “there’s a lot of trash talking about me going on regarding this thing with Red Barn and Vinciere’s.” He established that “more than a month ago” he and Shelton had inquired how the markets were allowed to operate and that Postman had promised him to “try and get somebody on that.” King had made a public records request on the topic, and was supposed to get a response “by the eighth [of September], I waited patiently, you did not” leading him to disagree with the praise others had given the agency regarding transparency and responsiveness. He asserted that a podcast of his would explain why their equity progress amounted to “a bad batch of goods.” He insisted that Garza and WSLCB staff had previously known about the markets from news reports and “you guys are liars, nothing more, nothing less, you’ve known about it and you still won’t answer the question.”
    • King and Shelton were still seeking records they were sure the agency had regarding a prior license application for Shelton. He blamed Seattle businessman Nate Miles for helping stonewall their request for documents and argued they’d only gotten “the letter that we already had, OK? So, no transparency there.” He made more allegations related to delays in furnishing Saad’s application materials and other requests he’d made of the agency regarding Emerald Haze.
    • “My point again, about Vincere’s and all these other places,” said King, “is not that they should be shut down. My point is, if they’re allowed to do it other people should be allowed to do it.” He was under the impression that cannabis licenses had been “set aside for the tribes…but meanwhile you’re telling Black folks” they couldn’t allow race-based preferencing in the social equity program. He was upset that agency staff seemed to be saying “we can’t do it for Blacks, we can do it for everybody else.” King demanded responses to his various inquiries, concluding his comments with the opinion that regulators at the agency were “fucking liars.”
      • Shelton subsequently sent an email to WSLCB Executive Assistant Dustin Dickson, cc:ing Cannabis Observer, which claimed “we didn't tip the LCB on something they had already known about for several years and visited on multiple occasions since 2014! Secondly, in the Sept. 2nd, 2022, LCB press release the LCB stated: "In the past few months, undercover LCB officers made three buys of cannabis at both unlicensed stores". That puts the LCB agents at over 1 month before our public comments regarding the unlicensed clubs.”
        • Shelton’s first public comments on the markets on August 3rd indicated he’d previously contacted Garza about them. 
      • Shelton wondered “Why are we shut down & being held as economic hostages while ‘white’ people still get to open illegal medical marijuana shops.” He deemed Garza a “criminal” for ignoring others that “open/operate illegal medical marijuana shops” while “blocking me from doing the same.”