WSLCB - Board Caucus
(August 30, 2022)

Here are some observations from the Tuesday August 30th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 3 takeaways:

• The cannabis compact between the state and the Hoh Tribe presented to the board was similar to past compacts, though it contained some definition and process differences while incorporating a “particular” comma in state law (audio - 10m, WSLCB video, TVW video, Compact).
  • WSLCB represents Washington State when crafting agreements with sovereign tribal governments called cannabis compacts giving access to parts of the state legal cannabis market while leaving those governments in charge of aspects of licensing approval, reporting, and tax collection.
    • The original compact with the Suquamish Tribe was finalized in September 2015 and was hailed as both a first in the state and first in the nation achievement. Their government entered into a revised compact in May 2020, though settling on a dispute resolution process around tax collection took months longer. The Tribe hosted the last formal meeting of WSLCB Tribal Advisory Council in April 2019.
    • The compact with the Nooksack Indian Tribe was presented at Board Chair David Postman’s first public meeting in March 2021. Learn more from the “Tribal Marijuana Compact and Memorandum of Agreement Example Workflow” from June 2019.
    • According to WSLCB Tribal Resources, the agency partnered with the Indigenous Cannabis Industry Association (ICIA)---though the group hadn’t been named in a public meeting we observed—and had been “working with tribes located within Washington and focused on indigenous communities.” At publication time, no members of the group’s leadership represented any of the 29 federally-recognized tribes in Washington state, though Executive Director Mary Jane Oatman was a member of the Nez Perce Tribe in neighboring Idaho. Board members last discussed their process for collaboration with tribal governments in November 2021.
    • Find out more about the movement towards cannabis reform among tribes in a December 2019 American Indian Law Journal article by Seattle University School of Law researchers, “Green means go: Tribes rush to regulate cannabis in Indian Country.” 
  • Establishing that the agency had finalized 20 cannabis compacts to date, Tribal Liaison and Director of Legislative Relations Chris Thompson started off his presentation by giving his view that the Hoh Tribe compact was "quite similar to” the template offered by the agency.
    • In 2013, a representative from the Hoh Tribe reported that the government was waiting to act on cannabis reform based on the federal government’s response. The sign in sheet for the 2019 advisory council meeting listed member Melvinjohn Ashue, the Hoh Tribe Economic Development Director.
  • After reviewing the process and history behind cannabis compacts, he elaborated on the Hoh Tribe compact, stating it would “authorize that tribe to engage in activities including retail, production, and processing, research, and a testing lab,” though tribal officials would choose whether they wanted to pursue licensure for those activities. Thompson then identified the document’s “new language":
    • A revised dispute resolution process had been “developed by Leo Roinila, our Assistant Attorney General with Indian Law and Tribal Affairs background” that allowed the uncommon clause of preferring binding arbitration, though such arbitrators “cannot determine questions of law.”
    • Aligning the compact with statute and rule rewording under HB 1210 signed into law on March 11th, mentions of “marijuana” were changed to “cannabis.”
    • The compact included a “most favored nation provision, which most compacts do” although that provision wasn’t in the WSLCB template.
    • Reporting would be through the Cannabis Central Reporting System (CCRS) rather than through a traceability system.
      • WSLCB leaders acknowledged difficulties for tribal cannabis licensees transitioning to CCRS on February 9th.
    • “Testing lab accreditation” details were changed to “reflect the coming system that will involve multiple state agencies in the process of accrediting testing labs” due to passage of HB 1859 on March 24th, which mandated formation of an Interagency Coordination Team (ICT) composed of representatives from WSLCB, the Washington State Department of Agriculture (WSDA), and the Washington State Department of Health (DOH).
      • No public action of the ICT had been reported, and the group was last mentioned publicly by a WSDA official on June 15th. 
    • The compact “prohibits drive-through service at retail” as that was an “important issue" for the U.S. Attorney for the Western District of Washington, Nicholas Brown, and something “they watch closely.”
  • An “important and a little bit complicated” issue for Thompson was how the compact included “the comma.” He explained the 2015 law creating compacts missed “a particular comma in a particular place regarding tax exemptions.” The comma was subsequently added, “in brackets,” he noted, by staff of the Washington State Office of the Code Reviser (WA CRO) though WSLCB “has for at least several years not recognized that comma…as part of law” as it “originated with the Code Reviser.” Without the comma, he relayed a staff opinion that “the most straightforward reading of the statute…there’s two categories of sales that may be exempted” from a “tribal cannabis tax.” However, Thompson reported that including the comma would mean “there are three categories of exemption.” He revealed that in addition to HB 1210 changing terminology in state law to use “cannabis,” the legislation “also removed the brackets, and placed the comma in statute” in a way the agency now recognized.
    • There was no public mention of this comma, or the impact it would have, identified during public hearings on HB 1210 covered by Cannabis Observer. The final House Bill Report for the bill acknowledges “technical corrections” including “correcting scriveners' errors.”
  • Thompson felt this change allowed for “a fuller recognition of tribal sovereignty” as the agency now interpreted the compact as enabling three areas of comparable excise and sales tax exemptions:
    • Sales to businesses or entities within the Hoh Tribe
    • Sales exempted under Washington law, for “example…medical patients” 
    • “Cannabis grown, produced, or processed within Indian Country”
  • Thompson said the addition of the comma resolved a “contentious issue” that had “bogged down” compact negotiations and stood to “help us improve, somewhat, our relations with our tribal partners.” Otherwise, the Hoh Tribe compact was similar to those which preceded it, he told board members, “and in a few important areas…takes us to the next level where we’re hoping to move” with other tribal agreements.
  • Grateful for Thompson and Roinila’s work, Postman observed that although "the comma is easy to laugh at," it was very important to resolve. He then wondered about the dispute resolution process, and what an arbitrator could decide besides a “question of law.” Thompson answered that they could rule on “anything that would be a question of fact" such as whether compact compliance was being met, or that it was “implemented or overseen” as agreed to by both parties. But determining an undefined phrase in existing law, “that could not go to an arbitrator,” he concluded (audio - 2m, WSLCB video, TVW video). 
  • Postman asked if the resolution around the comma would be expanded to other tribal compacts. Thompson stated there was already another compact that recognized the comma’s impact on tax exemptions and would be presented to board members once it was signed by the tribe’s leaders (audio - 1m, WSLCB video, TVW video). He also confirmed that Governor Jay Inslee would subsequently sign the compact at which point it would take effect (audio - 1m, WSLCB video, TVW video). 
  • Board members approved and signed the compact the following day at the August 31st board meeting.

• Agency leaders acknowledged progress on request legislation for 2023 as well as the retirement of Director of Legislative Relations Chris Thompson (audio - 3m, WSLCB video, TVW video).
  • Director Rick Garza brought up the draft request bills—last talked about on August 10th—and how staff were concluding a review of all the feedback they’d received. He continued, stating that Thompson aimed to meet with board members individually about any changes and then have “a final package ready by September 12th” for submission to the governor’s office.
    • “A revised version of the [tetrahydrocannabinol] bill" from 2022 was intended to “deal with the unregulated THC we have out in the unregulated marketplace." While Garza said the bill would look to address “impairing” products, the draft and summary avoided that distinction by focusing on overall cannabinoid content.
    • A social equity proposal could revise the board’s existing ability “to increase the number of retail allotments based on population increases” for social equity applicants to get “to open more retail stores than we’re currently looking at in the program.” Garza then mentioned a public hearing scheduled for September 14th covering the social equity rulemaking project intended to put “the program into place very soon, we hope.”
    • Finally, agency staff were advancing another bill “seeking subpoena powers with respect to cannabis”
  • Garza next announced the departure of Thompson from the agency “in the fall” and how the search for his replacement was underway. Though Thompson had also held the position of Tribal Liaison at WSLCB after the departure of Brett Cain in August 2020, Garza remarked that the post would “sit by itself” as they’d mainly focused on cannabis compacts. He speculated that now that 21 of 29 tribes had compacts, besides revising or updating them “there’s probably only two more left.” The once “limited” Tribal Liaison position would be “a lot more broad” in the future (audio - 2m, WSLCB video, TVW video).
    • Postman promised to thank Thompson “more formally” at a later date, but felt he’d done “really, really good work for us” on legislative and tribal endeavors (audio - <1m, WSLCB video, TVW video).

• The same day as the caucus, agency enforcement officers participated in a “special operation” against two unlicensed cannabis markets based on an investigation that began after public accusations.
  • Following passage of SB 5052 in 2015, medical dispensaries operating without state licensing were encouraged to apply through an application window at WSLCB in a priority-based licensing process or face closure and fines. After an application process that reportedly “froze out Black participation” while other applicants “forged their paperwork,” one African American former dispensary owner claimed agency staff “locked us out.”
    • In testimony at the first public hearing on SB 5052 in January 2015, Garza stated that media coverage revealed “the true nature of many of these dispensaries,” blaming lax screening, product testing, and public safety standards on a majority of dispensaries which fed “a very profitable recreational market.” He cited the partial veto of a 2011 medical cannabis law for not leading to a better dispensary system and promised that once the bill was enacted WSLCB would increase patient and public safety. He pointed to an editorial from then-WSLCB Board Member Chris Marr supporting a merging of the recreational and medical markets.
      • Marr became a lobbyist “specializing in cannabis, alcohol and hospitality regulatory issues” after leaving the agency.
    • By October 2020, Garza felt differently, criticizing SB 5052 for leading to the closure of a number of minority-owned businesses. He claimed there’d been “an influence by the industry to not allow all these dispensaries in,” accepting public criticism about how “thousands of people who had dispensaries were left out. There was no way they were going to get a license...I’m not judging it, I’m just sharing with you the experience [WSLCB staff] had.”
  • After dispensaries either closed or became licensed retailers with medical cannabis endorsements in 2016, several farmers markets around the state began catering to medical cannabis patients without licensing or oversight by state officials, including Vincere's Compassion Club in Tacoma and the Red Barn Trading Post in Roy.
    • A post on Reddit suggested the markets had been active for months before they were raided and Vincere’s Facebook page activity dated back to January 2018. Vincere’s page acknowledged the police action in a September 3rd post while the Red Barn Trading Post Facebook page was deactivated.
  • Prior to the August 3rd board meeting, former dispensary owner Kevin Shelton had named both locations in communications to Garza according to statements during public comment from his associate, Christopher King. Shelton added that the markets started “after I was shut down in 2016…and they’re still there.” Shelton again asked for an explanation from the board about why the locations hadn’t been shut down in public comments on August 17th.
  • The day of the caucus, the raids of the market were reported on social media and King accepted credit for helping bring action against the markets in one post. Though he was “not proud of it” he acknowledged concern about “the Black OG’s who got shafted the hardest.” Additionally, he posted comments he’d intended to share with the board at the August 31st board meeting, though neither he nor Shelton were present when invited to speak.
  • On September 2nd, WSLCB Communications staff confirmed in a press release that agency investigations of the markets were followed by a "special operation" where agency enforcement officers assisted by the Pierce County Sheriff’s Office executed search warrants and arrests following "multiple public complaints" about the venues.
    • In addition to unregulated cannabis products, Vincere's was reported to have "growing equipment, cash, electronic and surveillance equipment, ballistic vests, and two firearms" on the premises and one person was arrested. Red Barn was characterized by "a sizeable amount of psilocybin, peyote products, cash, electronic and surveillance equipment, and four firearms" and two people were arrested.
    • WSLCB Enforcement had used undercover officers in previous alcohol and cannabis investigations. But in an uncommon addition, the agency shared crime scene photos from the bust which were used in local reporting on the raids.
    • In September 2020, agency leaders talked about the role WSLCB Enforcement staff took when supporting other law enforcement agencies and “seizures for illicit activity” they were involved in as members of multi-agency drug task forces. A 2019 action against Levi Lyon of LyonPride Music led to the seizure of buses Lyon owned that were eventually returned due to what Lyon asserted were problems with the search warrant.
    • With suspects booked for “cannabis-related crimes” and “violations of the Uniform Controlled Substances Act” in the Pierce County Jail, the agency press release asserted officers “will be recommending felony charges for Unlawful Possession and Delivery of a Controlled Substance (RCW 69.50.401) and operating a cannabis club (RCW 69.50.465).”
    • Patient advocate John Kingsbury argued in a comment on a Cannabis Observer Facebook post that “I believe that RCW 69.50.500 empowers LCB officers to enforce any laws under RCW 69.50, regardless of whether the laws apply to cannabis, or mushrooms, or to something else, regardless of whether there is licensee status…Furthermore, RCW 10.93.090 creates the possibility of joint agreements, in which LCB limited-authority officers can enter into agreements with full-authority agencies…Think of this as the Pierce County Sheriff's Office deputizing LCB enforcement officers that have had some extra training beyond what LCB officers normally have.”
      • King had filed a federal complaint against WSLCB and agency leaders, alleging they lacked constitutional authority to commission individuals as a limited-authority law enforcement agency for cannabis. On August 11th, a federal court ordered the case dismissed with prejudice “for lack of subject matter jurisdiction.”
  • At publication time, the board had not met publicly after Communications staff acknowledged the agency’s role in the policing of the markets, having cancelled a caucus on September 6th. They were scheduled to meet in caucus again on September 13th and the next meeting allowing public comment was scheduled for September 14th.