WSLCB - Board Caucus
(June 11, 2019)

Here are some observations from the Tuesday June 11th WSLCB Board Caucus.

My top 3 takeaways:

• Facing traceability challenges, the Board prepared to adopt a new interim policy on cannabinoid additives to marijuana products.
  • WSLCB Policy and Rules Coordinator Kathy Hoffman walked board members through the conflict between the agency’s rules on usage of cannabinoid additives from outside the I-502 system versus the cannabis traceability system’s capabilities (audio – 2m).
  • The inclusion of cannabinoid additives, such as cannabidiol (CBD), in 502 products from sources outside the 502 system was legalized in 2018 by the passage of HB 2334. A WSLCB rulemaking fact sheet for the bill outlined the agency’s responsibility for the regulation of any additives “Obtained from a source not licensed under Washington state law as long as the CBD product:
    • Has a THC level of 0.3 percent or less on a dry weight basis, and
    • Has been tested for contaminants and toxins by a testing laboratory accredited pursuant to state law and in accordance with testing standards created under state law and applicable state administrative rules.”
  • The agency’s corresponding rules “superseded what we were able to do in traceability” due to limitations in the Washington version of MJ Freeway’s Leaf Data Systems. Absent prioritization from the agency, there has been no way to comply with the rules from their inception.
  • Hoffman admitted, “we don’t have a workaround for this yet.” She confirmed the traceability system could handle marijuana-derived cannabinoid additives created by licensed producers and processors.
    • During the May 9th Traceability Advisory Committee meeting, vendor MJ Freeway claimed to be in talks with the agency about this workflow. Cannabis Observer reported that “Project Manager Clare Olson asserted any work would have to wait until a subsequent subscription services release. No dates have been set for those releases, but it would be well into 2020 – too late for quick turnaround of CBD products created from this fall’s hemp harvest.” Since then, MJ Freeway’s Director of Regulatory Systems, Todd Caldwell, failed to meet a self-imposed deadline to deliver an estimate scoping the work.
  • “So, let me see if I got this straight,” Board Member Russ Hauge began, “We’ve got a processor that wants to make a cannabis product, but infuse it with CBD, and if the CBD comes from ‘Joe Vendor’ from mainland China, we do not have a way to enter that substance into our traceability system?” Hoffman confirmed his understanding (audio - 1m).
  • When Board Chair Jane Rushford asked about a “workaround,” Hoffman said, “I think Kendra [Hodgson, Cannabis Examiner Manager] is working on it.” She explained the absence of a workaround created the necessity for a new interim policy, as otherwise requiring the change to the traceability system was “not possible at this time” (audio - 1m).
  • Board Member Ollie Garrett wondered whether it was “necessary” for the industry to be able to use such additives. Hoffman and Hauge believed that it was. Hoffman assured the group that other rules for cannabinoid additives from outside the 502 system, including “recordkeeping and testing,” were in place (audio - 1m).
  • On a related note, Hauge reported that members of the Washington Sungrowers Industry Association (WSIA) told him of “pushback from our Licensing folks based on an interpretation of the rules that would prevent a grower who was licensed to produce cannabis to also produce hemp.” Hoffman concurred that she’d “seen email traffic about that as well.” Hauge wanted to know if current rules could be interpreted that way, and if so, was there an effort from WSLCB to “correct it” (audio – 5m).
    • Hoffman promised staff was “looking into it” to see “how do we reconcile that concern?” Hauge said he was surprised the agency would “stand in the way of somebody taking advantage of an opportunity to grow a crop” and insisted “there has to be a way around it.”
    • Garrett raised the possibility of applying an equity lens to the problem, following the advice of Washington’s Office of Minority and Women’s Business Enterprises (OMWBE) to “see if there are other opportunities within that.” Rushford called it an “interagency issue” between the state Department of Commerce, Washington State Department of Agriculture (WSDA), and WSLCB. Rushford recalled Agency Director Rick Garza would be meeting with WSDA soon, possibly leading to “something that addresses your concern, and those expressed by others.”
    • Rushford sounded amenable to producers wanting to cultivate both cultivars while wanting cannabis “segregated” and “distinguished” from hemp plants. Hauge urged action because “crops got to be planted.” Others agreed that if it was in rule, it was an “artifact” rather than a conscious choice by the Board.

• Chair Rushford provided an update on the Cannabis 2.0 project before discussing a legislative framework for cannabis issues at the agency (audio – 6m).
  • Cannabis 2.0 (C2.0) has evolved since its introduction in November as the next era of cannabis regulation reflecting industry and regulatory maturity. Rushford discussed the initiative on multiple occasions before its April launch. She spoke about the run-up to the first interagency gathering during the May 15th Executive Management Team (EMT) meeting. C2.0 has elicited public comment on multiple occasions, but structured engagement with stakeholders and the regulated community has yet to be announced.
  • Rushford talked about a meeting of leadership from roughly a dozen state agencies she’d convened to make progress on C2.0, calling it a “very successful discussion on how the agencies intersect.” She said each state actor left with “specific next steps” for their department or agency to accomplish, among them organizing a legislative meeting on cannabis “so all those agencies involved can bring their discussions to a legislative meeting which [the Board] wouldn’t be a part of necessarily, but we’d hear about from Chris [Thompson, Director of Legislative Relations].” Rushford later noted that no legislative agenda could occur without approval from Governor Jay Inslee’s office.
  • Rushford pointed out that while she’d reached out to agency or department directors, all ultimately sent staff designees rather than attend, but she anticipated the next meeting would see more directors participate. She also spoke of a loose agreement among the meeting’s attendees to “show up” for legislative bills on cannabis and support impacted agencies.
    • While Department of Commerce leadership was “all tied up” and didn’t attend the meeting, Rushford asked Garrett to gather anything needed “to have a conversation” on C2.0 with that organization the next time Garrett met with them.
  • Rushford felt that “galvaniz[ing] the interagency discussion” was the “ultimate thing that was achieved.” She promised more C2.0 meetings as other agencies “seemed hungry” to engage more in the future. Along with meeting notes, Rushford said documentation of “who’s who in the agencies” regarding cannabis would be produced in the coming weeks and she planned to personally approach some departments to learn more about their efforts.
  • Moving on to how the agency considered proposing legislation, Rushford said she’d met with Thompson, Director Rick Garza, and Deputy Director Megan Duffy to ask “what framework do we want to have for the upcoming legislature, and how will we structure our proposals?” The priorities the group came away with were those the Board adopted at last year’s Board Planning Meeting: address medical cannabis, increase consistency of enforcement, and emphasize social equity when re-issuing any retail licenses (audio – 5m).
  • From there, Rushford said they included “other criteria that should be considered”: avoiding imposition of new costs on licensees, an “external focus,” defensible “time-sensitive urgency,” and “proposals with little controversy.” She concluded that proposals the agency put forth “should attempt to meet those criteria.” Garza, Duffy, and Thompson planned to summarize the criteria to share with other EMT members.
  • Garrett returned the conversation to equity, noting that social consumption legislation—which was ignored by the legislature earlier this year—could be viewed differently by lawmakers if equity were incorporated better. Rushford agreed that “how we package and present” bills would be “critical, especially in a short [legislative] session.”
    • See Cannabis Observer’s analysis of the social consumption bill.

• Board members reacted to Seattle Hempfest’s lawsuit against the agency (audio – 12m).
  • A newly filed lawsuit announced by Hempfest Director Vivian McPeak alleges that WSLCB “enacted new ad restrictions and interpretations that prevent licensed businesses from having signs or booths at Hempfest that identify the businesses’ support for Hempfest or for any legal reform or public education. Hempfest and two licensed businesses are challenging the overbroad free speech restrictions that prevent those businesses from simply identifying themselves and sharing information entirely unrelated to advertising.”
    • Read the 11 page complaint filed with the Thurston County Superior Court.
  • Hauge raised the topic of state advertising laws rather than agency rules prohibiting “any sign or other advertisement for a marijuana business or marijuana product, including useable marijuana, marijuana concentrates, or marijuana-infused product, in any form or through any medium whatsoever within one thousand feet of the perimeter of a school grounds, playground, recreation center or facility, child care center, public park, or library, or any game arcade admission to which is not restricted to persons aged twenty-one years or older” (emphasis added).
  • The Office of the Attorney General (OAG) will represent the agency in the suit and Hauge, a former state prosecutor, felt the issue may have no winner. “We’re standing in the way of free speech, allegedly, and is there any reason why we can’t be more accommodating, at least in the context of the lawsuit?” When he asked if the issue in the suit was “a fight we want to fight” both Rushford and Garrett readily agreed it wasn’t, and Rushford vowed to dig deeper into the topic with another Assistant AG.
  • Hauge had been informed about the interpretation of the law by WSLCB Enforcement staff, but he admitted, “I didn’t know we were going to get sued and it was going to end up in, as a lead story in the Seattle Times.” He later expressed frustration that “ decisions get made in our name without us participating.” Rushford felt the signage under scrutiny “doesn’t hugely violate our advertising [laws].”
  • Garza will be meeting with Assistant Attorney General Bruce Turcott and another member of the OAG to review the case soon.