WACA - Spring Meeting - 2022 - Opening Remarks
(June 15, 2022)

Here are some observations from the Wednesday June 15th Washington CannaBusiness Association (WACA) 2022 Spring Meeting.

My top 4 takeaways:

• Washington State Liquor and Cannabis Board (WSLCB) Chair David Postman had had an at times fraught relationship with WACA leaders due to some pointed criticisms of the agency and lobbying against some of the board's regulatory agenda.
  • Since joining the board in March 2021, Postman had heard criticism of agency actions around cannabinoid regulation and adjudicative proceedings, including “frustrations” from WACA Executive Director Vicki Christophersen in May of that year. But WSLCB leadership had also engaged in at times terse electronic communication with members of the trade group as well.
  • In December 2021, board members discussed pushback against their 2022 legislative agenda from WACA leaders, who subsequently helped thwart multiple bills written to give WSLCB staff greater authority to regulate cannabinoids during the 2022 legislative session. The bills failed amidst accusations of hostility and “misinformation” sourced from opponents including members of WACA.
    • WACA members also championed an unsuccessful effort to modify the composition of the board. Neither the effort to reshape the board nor opposition to the agency’s request legislation were mentioned during public discussions at the WACA 2021 Fall Conference in November 2021, which included participation by Director Rick Garza and WSLCB staff.
  • On March 8th, Postman spoke his mind on what he saw as WACA’s outsized lobbying influence and concerns that “a powerful lobbying group that doesn’t like what we’re doing” was making “disparaging remarks about the staff of the LCB” in addition to “false assertions that we did not do outreach, or that we ignored certain things, or that somehow this was predetermined.” He concluded that “the voices that were heard, unfortunately, were those of the well-connected and the well-capitalized," those who wanted “fewer companies dominating more of this marketplace.”
  • As the conference opener, Postman’s speech served both as his highest profile engagement with WACA leadership and framed the perspective of agency leadership for members.

• Postman started off his remarks by talking about the give and take between regulators and licensees in any industry before speaking to the particulars of cannabis regulation and its increasing normalization in Washington.
  • Acknowledging his background as “a political reporter” before going into government service “just as we were implementing [Initiative-]502,” Postman said he’d written about a “tension between industries and regulators” which “exists in every venue” and sector. Even if they’re sometimes unpopular with the sectors they oversee, he observed that regulators were “ok with that, that’s not what they’re there for,” as their priority was the safety of those working in an industry and the public. Though state agencies should allow for “innovation," Postman expected there would always be “tension” and “costs associated with regulation.” He gave the example of Washington State Department of Labor and Industries (WA LNI) Director Joel Sacks as someone who had “done an amazing job” and earned respect for stabilizing “rates'' controlled by the department, concluding effective regulation “can be done” provided it didn’t “go wrong.”
  • Postman didn’t expect anyone in a profession to defend that field’s bad actors. He noted that journalism wasn’t free of “crooked reporter[s],” calling out Janet Cook “who made up a story” which briefly got her a Pulitzer Prize for Feature Writing. “Mistakes happen,” he added, aware that WSLCB as an agency and he himself were fallible. But “the question is what do we do when that happens, and how do we move beyond it?”
  • Turning to cannabis regulation more particularly, Postman felt it remained difficult due to its “newness.” Nearly a decade after voters approved Initiative 502, he felt policy was “still in its magma stage.” Cannabis legalization was “not an experiment, we're not going back" he argued, “this is here to stay and here to grow.” But changes to the industry and regulations would continue until “everybody accepts it like the people in this room do,” argued Postman.
  • Postman knew some in the state still weren’t comfortable with cannabis as a legal commodity. Voters increasingly accepted alcohol and he expected public acceptance of cannabis would increase. Postman remembered that Governor Jay Inslee had opposed legalization “but it passed,” garnering “more votes than some of the candidates who were on the ballot that year,” Inslee included. With a voter mandate to implement the nation’s first adult-use cannabis system, he commented that while Obama Administration officials at that time “hated cannabis” and “didn’t want it," Inslee moved ahead with the pitch to them that “we're going to be really strict." Despite the federal Cole memorandum from 2013, Postman believed many questions persisted including whether state employees collecting cannabis tax revenue could “be arrested by the federal government.”
    • The memo was subsequently rescinded in 2018, but it remained the polestar of federal guidance on state-legal cannabis for some regulators.
  • The current state of the industry and federal attitudes around cannabis were “really exciting” to Postman. Wider acceptance and the possibility of “national legalization” made it an “interesting time” to be involved in the cannabis space. He believed it “behooves us" to work together “through this next phase of it” and “not in opposition to each other." Postman argued both groups “believe in the same big picture” of cannabis normalization and safe use by adults. While there would be “policy differences" and lingering opposition in areas with bans and moratoriums, he didn’t find state officials to be “fundamentally opposed” to cannabis policy changes which business supported, specifying the SAFE Banking Act.
  • Finding that moving cannabis legislation in the U.S. Congress was a complicated situation, he pointed to the U.S. Senate where opposition eschewed normal partisan divisions regardless of which party controlled that chamber. Postman mentioned the complex fallout from the federal legalization of hemp in 2018 along with a ruling by the U.S. Court of Appeals for the Ninth Circuit about hemp legalization and delta-8-tetrahydrocannabinol (delta-8-THC) which kicked the matter back to lawmakers. He noted the decision by the appeals court stated that “Regardless of the wisdom of legalizing delta-8 THC products, this Court will not substitute its own policy judgment for that of Congress. If…Congress inadvertently created a loophole legalizing vaping products containing delta-8 THC, then it is for Congress to fix its mistake.” Postman voiced skepticism Congress would act on clarifying the status of delta-8-THC items, flatly predicting it was “not gonna happen" anytime soon, “and there will probably be more litigation around it.” He nonetheless hoped both regulators and licensees could demonstrate “this is a system that works” while remaining “exceptionally successful” at keeping cannabis away from minors.
    • See other reactions to the ninth circuit ruling from:
      • Bloomberg Law
      • The National Organization for the Reform of Marijuana Laws (NORML)
      • JD Supra, courtesy of Miller Nash LLP
  • Postman brought up the Cannabis Regulators Association (CANNRA), remarking that Garza had helped convene “120 some people” from agencies and organizations across the country “leaning on each other” to learn regulatory approaches and best practices. He said “people in Congress are looking at states with legal adult markets,” especially around cannabis business banking, which had become related to industry safety and security. Postman found that officials would have to continue showing they could run an accountable cannabis market.

• Postman talked about a need to revise Initiative 502 in regards to equity in license access and license tiers in collaboration with stakeholders given the “largely responsible consumption” of cannabis by adults.
  • Though “still in this proving stage,” Postman observed licensees and regulators had kept “those worst kind[s] of scenarios out of the picture.” Cannabis legalization wasn't a failing policy, but he considered Initiative 502 “just a start” in refocusing public policy on harm reduction, concluding “it was an incomplete document" in need of changes.
  • Postman suggested potential alterations to Washington’s legal cannabis marketplace included the social equity implications of industry access, licensing tiers where “some worked better than others,” and other continued improvements which wouldn’t threaten “the heart” of the initiative.
    • At time of publication, equity in the cannabis industry was being evaluated by the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) and local government bodies like the Seattle City Council.
  • Postman then credited “consumers and customers, too,” whose “largely responsible consumption” he believed was keeping adverse reactions to a minimum (“that, again, some people feared”). Before his appointment to WSLCB, Postman noted he’d been in a meeting where a University of Washington (UW) “medical person” explained “they were already seeing a spike in emergency room visits” from middle-aged people - “but we’ve been able to avoid a lot of that.”
  • Calling for social equity in cannabis, Postman stated that the topic was “of utmost importance to the LCB" where they were striving “to do better” and “change the way this industry looks, and feels, [and] works.” He described agency staff as seeking to understand “substantive case law that’s out there about trying to address racial inequity” while under political and economic pressures. The Social Equity rulemaking project was delayed so officials could take “another hard look” and “do better” on their proposal, according to Postman. “I hope we’re going to be back on track soon on that,” he commented, asking for “a lot of support for what we do come up with” eventually.
    • The board voted to withdraw proposed social equity program rules on May 11th and Policy and Rules Manager Kathy Hoffman discussed the pause on June 7th.
    • Later in the WACA meeting during a session with WSLCB staff, Hoffman was asked about the project and responded that her team was “making sure the legislation was being implemented in the spirit of the legislation in which it was created.”
    • At the June 21st board caucus, Hoffman stated that a revised CR-102 was expected by “either the first or second board meeting in July.”
  • Postman believed "we're gonna have to [improve cannabis equity], we're doing it, it needs to be done," but cautioned that the social equity program and potential rules changes may make “someone feel like they're going to lose something. I can’t say that’s not true, it’s possible” in moving to a “system that in the long run is going to do the best good…for the largest number of people.”
  • His final wish for the sector was to have more collaboration between existing industry groups, mentioning a retailer “on the same street” as another cannabis shop that had been robbed “and she didn’t know until it showed up in the paper later.” Postman didn’t think the cannabis sector was a “monolith” but thought they could do more to “talk to each other.” WACA as an organization “will not agree with everything” done by other cannabis trade associations in Washington state, said Postman, who expected he wouldn’t either since members of multiple groups had already accused him of “being in the pocket of the other guy.” Nonetheless, he was of the mind that if WSLCB could play a role in getting “people together, across associations, no associations,” the agency could showcase how their policies were “looking at this in a mature, long range way” while staying open to “compromises” for the good of the wider cannabis sector.

• Postman spoke about being “a pessimist” about possible federal cannabis legalization but wanted WSLCB to be a “positive force” in facilitating greater collaboration with WACA members and other cannabis stakeholders wherever there was common ground.
  • His pessimism around the odds for national reform had increased after seeing the stalled progress on the SAFE Banking Act. Even if “the Biden Administration is better on this question, by their words,” Postman observed the administration was “far from advocating for it.” Convinced President Joe Biden would sign a legalization measure if passed by Congress, he was just as certain the president would do nothing to help its odds. Postman thought “we’d be lucky if it happened in the next five years” as he found contemporary statements by federal officials disheartening and “archaic.” He said they would be “convening some groups to talk about this” and hopefully get participants with “a wide array of backgrounds” to talk about what they wanted from legalization - and what they were fearful about changing. Postman anticipated that advocates from all legal cannabis states would want particular changes to their own state systems, and that Washington “needed to have a voice” in the discussion. He suggested seeking out as many areas where regulators and stakeholders could have a unified voice because “that’s where there’s going to be some power” to shape federal opinion.
    • Postman previously talked about his impressions of federal cannabis reform in September 2021, and in response to several lethal retail robberies on March 22nd.
    • CANNRA members selectively invited a broad swath of national and regional cannabis business and advocacy groups along with other public health organizations to an initial stakeholder meeting in Seattle, but state and local organizations were excluded along with the press.
  • Postman assured WACA members the board was “open to any suggestions…about how to engage in a better way.” He called the agency’s policy team the “best operation in state government” with the “best model I’ve seen for engaging people.” Postman pushed back on the notion, which had previously been voiced by WACA leaders, that members weren’t “given the opportunity to provide input…we really go above and beyond on that.” Stakeholders didn’t have “to be part of an association” to reach out to board members, he added, as WSLCB sought to be “a positive force in moving this industry." Postman wished to inspire a view that policy disagreements weren’t "a characterological problem" impugning people’s “ethics, morality, or anything else.”
  • Reiterating the overall newness of the industry coupled with heavy scrutiny from “a lot of people who don’t care about this industry like you all do,” Postman said he and WSLCB staff in attendance welcomed conversations later in the conference including “ideas on anything” facing the agency.