WSLCB - Focus Group - SB 5367 Implementation
(March 28, 2024)

Here are some observations from the Thursday March 28th Washington State Liquor and Cannabis Board (WSLCB) focus group on the SB 5367 Implementation rulemaking project.

My top 5 takeaways:

• Policy and Rules Coordinator Cassidy West went through the history of SB 5367 (“Concerning the regulation of products containing THC [tetrahydrocannabinol]”) and the long running rulemaking project at WSLCB.
  • The legislation was designed to specifically regulate the sale of ingestible hemp-derived cannabinoid products increasingly available online and in shops without WSLCB oversight or age restrictions following federal legalization of hemp in 2018.
    • After being signed into law in May 2023, the measure took effect the following month, at which time board members approved a CR-101 to begin the rulemaking project. At that time rulemaking was forecast for completion in January 2024, but all completed rulemaking projects in 2023 and early 2024 were alcohol-related, with SB 5367 among projects initiated but delayed in 2023.
    • An initial round of focus groups were hosted by agency staff in mid-December 2023. Following more internal work by West’s team, another round of public engagements were begun on March 26th.
  • At the outset of the focus group, West called it an “informal discussion” centered on “four questions…total to just throw at y'all.” She didn’t “expect any answers today, we're really just laying the groundwork on how this…legislation changed the rules.” The focus group was one of several attempts to gather input on SB 5367, and responses would also inform discussion topics for future events on the subject (audio - 2m, presentation).
  • Next, West asked that participants reveal their affiliation after the first focus group had a “majority of cannabis industry…I'm just really interested to know what the make up of this group is.” As responses came in, she declared attendees included (audio - 5m):
    • “Eight cannabis reps,” including four employees of a cannabis business
    • “Around eight” consumers
    • Someone with “tribal affiliation”
    • Of the 49 attendees identified in the meeting, West didn’t explicitly state how many were with the “public health and prevention community;” WSLCB or staff at “another state agency;” non-cannabis WSLCB licensees; or “citizens that are not consumers.”
    • Attendees also identified affiliations with a “doctor's office” as well as a “licensed hemp producer,” software integrator, “medical marijuana consultant,“ and members of one of the “hemp associations.”
  • West appreciated the attendance, striving to include “all of your perspectives to help draft these rules because it's important…to help inform how we can create the best policy that has the most favorable outcomes.”
  • Explaining the background of issues that led to passage of SB 5367, West said the law had been “designed to tackle a loophole unintentionally created” by federal approval of hemp. She also highlighted specific impacts of the law  (audio - 6m):
    • “Some definitions were amended, those include ‘cannabis,’ ‘cannabis products,’ and ‘THC concentration,’” plus new definitions created for “package” and “unit.”
    • “The rulemaking scope” was dictated in statute, and agency officials had to “modify our existing rules to align with the statutory changes.”
    • Each scheduled focus group would be “topic specific, but the point of those are to review, discuss, and gather feedback on the modifications” in order to make draft rules, and then “final draft proposed rules” in a CR-102.
  • West expected workshop #2 would look at “serving and transactions limits, packaging and labeling, and cannabis warning symbols” during focus groups on April 9th and 12th. Workshop #3 “will be discussing the changes to the quality assurance and quality control testing; and the cannabinoid additives” scheduled for meetings on April 22nd and 23rd. Draft rules for each session would be released one week before, she told the group.
  • West briefly talked about the WSLCB rulemaking process, and stressed that public comment on the project would be open through May 1st. There would be a comment period on the CR-102 once it was published, “but I'm really hoping that I’ve captured all of your concerns before then,” said West.

• The first rule chapter talked about were definitions in WAC 314-55-010 following draft text with possible changes and additions, evoking several questions from attendees.
  • West felt the importance of changes in this section were due to “how it shifts the policy, and so I want to make sure that we have a really clear understanding of what those definitions are, what they mean, and how it affects things.” She noted changes adding “the definition of ‘cannabis products’ and ‘THC concentration,’” and “six sections are affected by [a] new definition of ‘package’ and ‘unit’” (audio - 3m).
  • West further indicated a new section would be created dealing with synthetic cannabinoids “outside of the definitions” which she was looking for input on defining “‘synthetic,’ ‘semi-synthetic,’ [and] ‘synthetically-derived.’” She suggested WSLCB staff had a goal of “clarity and consistency.” West added that “CBD [cannabidiol] product,’ ‘cannabis concentrate,’ ‘cannabis infused products,’ and ‘synthetic cannabinoid’ would be separately defined “because they directly correspond with the 5367 amended definitions” (audio - 1m).
    • West included that a January survey on SB 5367 relating to defining synthetic cannabinoids showed people "overwhelmingly in support" of creating definitions for all three proposed terms.
  • Shawn DeNae Wagenseller, Washington Bud Company Co-Owner and  Cannabis Alliance Secretary, asked when they could see “the actual verbiage that defines CBD products, CBD concentration, cannabis concentrates” and the terms West had talked about. West replied that she’d referenced the existing legal definitions in the Revised Code of Washington (RCW) “in the event that the definition changes we won't have to change our rules” (audio - 1m).
  • Jessica Tonani, Verda Bio CEO, clarified which statutes West was referencing. West said that while not in the definitions section of in RCW 69.50 there were mentions of “synthetic cannabinoid” in RCW 69.50.204 (audio - 1m).
  • West also relayed that for limit of detection (LOD) and limit of quantification (LOQ) she’d relied upon definitions used by the Washington State Department of Agriculture (WSDA) in WAC 16-309-010 as proposed by that department as part of their cannabis lab standard rulemaking project as they “would soon be in place.” West had been following that project which she noted would have a public hearing on April 9th (audio - 3m).
  • Bonny Jo Peterson, Industrial Hemp Association of Washington (IHEMPAWA) Executive Director, clarified the distinction between LOD and LOQ, with West saying it was “about the equipment" used by labs, and that there would be dedicated focus groups on the subject set for April 26th and 30th (audio - 3m).
    • Attorney Scott Wheat asked if these definitions would clarify how to detect any THC above zero. West rhetorically asked “what is zero” and said her team was focused on the limits of detection, having discussed it with staff after a March 26th focus group, the initial workshop #1 covering definitions and endorsements. She said the WSLCB Cannabinoid Science Work Group had called for an LOD of 0.03% THC.
      • The recommendation from the group related that this “limit can be achieved by laboratories that use methods that have specifications equal to or better than those of the AOAC methods. The group discussed an understanding that most certified cannabis testing labs in Washington were testing to 0.[0]3%, making this standard achievable in rule to implement E2SSB 5367.”

• West then turned to rules for retail medical cannabis endorsements in WAC 314-55-080, quickly explaining some of the proposed rule language and clarifying a conflict with a dedicated rulemaking project on the subject (audio - 2m).
  • As part of a separate rulemaking project related to endorsements, WSLCB heard public feedback about potential changes on March 11th and 14th.
  • During the focus group, West described how they were “proposing language that removes the special privilege that retailers with the medical cannabis endorsement would be able to…giveaway products that are less than 0.3% THC” given that “retailers can sell any products [with] any detectable levels of THC. So this is quite a bit of a policy shift.”
    • She further noted that Policy and Rules Coordinator Daniel Jacobs was further ahead on that project, and felt his “language [was] so much better than mine and it does the same thing anyway.”
      • At time of publication WAC 314-55-080(4) covering endorsement holders stated they “may sell products with a THC concentration of 0.3 percent or less. The licensee may also provide these products at no charge to qualifying patients or designated providers.” Jacobs’ draft language proposed that the subsections be rewritten so that the “licensee may also provide medically compliant cannabis products defined in chapter 246-70 WAC at no charge to qualifying patients or designated providers.”
    • West only planned to incorporate his language on the endorsements privilege “if something were to go awry and…that project didn't stay on track then…we would only be touching subsection (4) of those medical cannabis endorsement rules.”

• Half of the meeting focused on broader questions about how implementing SB 5367 would impact the sale of hemp products in the cannabis market; dual licensure of hemp and cannabis production; sale of cannabidiol (CBD) products; plus how state policies might interact with federal laws.
  • Peterson didn’t consider SB 5367 to have lessened restrictions on selling products “not made from something grown in the [adult use] system other than very specific CBD additives to those products.” She wanted to know how the law allowed hemp products to be sold in medically endorsed retail stores. WSLCB Director of Policy and External Affairs Justin Nordhorn spoke up to say “this particular ruleset doesn’t provide that allowance,” before he reviewed the existing provision for CBD as an additive in cannabis products with more than 0.3% THC. “Our rules aren't in a position to allow for the hemp industry to sell…end user products directly to…retailers, there would have to be some additional changes in statute” (audio - 2m).
  • WSDA Cannabis Programs Manager Trecia Ehrlich had assumed that “dually licensed” hemp and cannabis producers could sell “smokable hemp” to stores as long as it was produced in accordance with WSLCB licensure. Nordhorn believed you needed WSDA hemp licensing to produce plants below 0.3% THC, and WSLCB licensing in order to sell hemp crops into the legal cannabis market (audio - 2m).
  • Wheat was curious whether hemp growers could “sell their raw crop, their flower” into the 502 system before it was processed or packaged for sale. When Nordhorn answered that it wouldn't be allowed, Wheat wondered how licensed hemp producers could sell crops in the state. Nordhorn attributed the operative difference to the amount of THC, and noted that consumable products with no detectable amount of THC could be sold outside of the adult use cannabis market, but that any THC in hemp meant the plant could only be a CBD additive to other 502 products (audio - 5m).
    • Ehrlich indicated that ingestible CBD products continued to exist in a gray market: “while you see lots of CBD beverages and things of that nature out on the shelves, they are not technically lawful in Washington state.” She suggested one of the main impacts of SB 5367 had been to thwart sale of hemp “smokables” which had also been considered ingestible. Products produced through the WSLCB system in conjunction with WSDA hemp licensing may be able to be sold in retail stores, Ehrlich commented.
    • Wheat considered that as hemp was federally legal, it could "completely undercut the market" of cannabis, which was federally illegal. Ehrlich noted that CBD was considered a drug by the Food and Drug Administration (US FDA) which restricted how it could be used in food products. She remarked how hemp for industrial purposes wasn’t illegal, but “if you roll it into a joint, and put it into a package that implies that it is meant to be ingested via inhalation it does become a consumable per 5367.”
  • When asked about cannabis health and beauty aids (CHABA), Nordhorn acknowledged that under a separate law “that's specifically exempted in the statute, meaning that the provisions here wouldn't apply to that” (audio - 1m).
  • Peterson wanted clarification on circumstances under which hemp consumables could be sold through the legal cannabis market. Nordhorn made clear there were limits on how their agency could regulate hemp, but they did have oversight for all consumable products with THC, and were trying to develop “what that means” if someone is selling those products outside of retail outlets. He found it a “little bit confusing,” but when they were trying to set a level of THC in hemp products, “the legislature decided to make it zero and we advised a lot of people…that zeros just doesn't work. And so they went and they passed the bill that says ‘no detectable levels,’ and that's what we're kind of grappling with now is what does that mean?” He thought there needed to be additional changes in law, but recognized that WSLCB was unlikely to propose them “because the detectable limits as we're developing these rules are going to be enough of a foundation for the agency to be able to do its work” (audio - 5m).
  • Wagenseller wanted to know if—once licensed to grow hemp by WSDA—her hemp crop had to be part of her limited cannabis canopy in order to be used in her products as “I thought hemp and cannabis farms had to be like a thousand feet apart or something” (audio - 7m).
    • Erhlich said there actually wasn’t a mandated buffer distance, “however, you cannot intermix your hemp with your cannabis…we already have dual licenses…and what they do is they keep their crops separate and if incorporating hemp into their grow changes their floor plan in any way they do have to notify the LCB of any changes.” Additionally, she shared that WSDA inspectors had to approve crops as part of federal requirements, but didn’t know if WSLCB would classify hemp plants as part of licensee canopy.
    • Nordhorn said the exact location of hemp plants within a licensed cannabis production facility was “still a little bit gray,” but plants not grown on the premises could be regarded as “inversion” into the legal cannabis market if a licensee couldn’t account for how they’re “bringing something in” to their supply. “If you were growing everything under camera and those types of things within the parameters,” he felt there would be “a little bit more latitude for that because we'd be able to validate and verify that that was grown by the licensed producer on the same site.” Nordhorn knew there were limits on the ability of WSLCB to regulate hemp licensees, but they were empowered to test plants through a WSDA lab and take action if they had more than 0.3% THC. He added that agency representatives could also act if cannabis plants were presented as hemp, but put a producer over their cannabis canopy. Given there was a “limited amount of regulatory oversight that the LCB can do and, and the legislature was very specific to keep LCB out of that,” he warned that this meant there were some “policies about how we…get things from the hemp industry into the [cannabis] industry that can't be solved in this rule making. That has to be a legislative fix.”
    • West mentioned that they could talk more about the topic in the focus group on cannabinoid additives.
  • Micah Sherman, Raven Co-Owner and Washington Sun and Craft Growers Association (WSCA) Board Member, inquired about creation of consumable hemp items that didn’t have THC, as it sounded like this would be a new allowance under SB 5367. Ehrlich said legal sale of smokable hemp with less than 0.3% was her interpretation of what was permitted under the law, “and it sounds like from this whole dual licensee perspective the, the safest way to do that would be within your canopy and updating your floor plan.” Sherman advised that low-THC plants had been something they could already grow within their canopy. The two continued to discuss the points during plant growth when there was enough THC present to count as cannabis (audio - 4m).
  • Sherman was also curious about whether licensed cannabis processors could make hemp consumable goods. Nordhorn gave his understanding that this was part of where dual WSLCB/WSDA licensing “comes into play.” He said processors had to buy plants from inside the legal system, and retailers had to buy from processors, but as long as someone was licensed to produce hemp, their crop under 0.3% THC could be sold for processing (audio - 3m).
  • Peterson sought more clarification around selling hemp into the adult use cannabis market. Nordhorn reiterated his past explanation and acknowledged there were some points of ambiguity (audio - 3m).
  • Wheat delved into the interplay between federal and state hemp laws, observing “it's becoming clear to me…why this bill was scored to put 75% of hemp producers out of business in this state.” By placing moratoriums on new cannabis producer licenses, he argued WSLCB leaders had forced people interested in the market to buy up “usually failing…producer licenses and then it takes…12 to 18 months and regulatory review to make that happen.” He considered the approach under SB 5367 to “severely prejudice hemp producers” (audio - 5m).
    • Wheat called for dedicated WSLCB licenses for hemp producers to sell their products into the adult use market to give them "a little bit of an opportunity." Nordhorn stated that with existing law limiting the ability of WSLCB to regulate hemp production, there would first need to be legislative approval.
    • Wheat asserted state officials had collapsed hemp products into the 502 market by defining ingestible products as those with detectable THC, below the federal limit of 0.3%. He considered this to be a market “capture” where federally allowed hemp items were limited to a “very niche market.” Given state lawmakers “diverted the sale” of hemp, he thought WSLCB should issue more production licenses. Nordhorn was open to learning more, but asserted Wheat’s suggestion was beyond the scope of the rulemaking project.
    • After the meeting adjourned, Wheat shared that he was both a hemp licensee and an attorney for tribal governments interested in the impacts of SB 5367.
  • Bethany Rondeaux, Olympus Horticulture Owner, had the impression that licensees could also buy CBD oil, as this was a category listed in the WSLCB disclosure forms for vapor products. West acknowledged that was correct, and “we will get into the details of that at that third session” (audio - 1m).

• West looked ahead to their next focus group, and provided questions she wanted participants to consider for subsequent meetings (audio - 2m).
  • Thanking attendees, West highlighted several questions she hoped they would think about before the next event on Tuesday April 9th, since the different topics were supposed to “build on to each other as we go through the rules.” She summed up the questions as:
    • “Clarity…did the rules say what we think they say?”
    • “What are some implementation challenges?”
    • “What should enforcement look like?
    • “Do you have another suggestion for improving or addressing whatever we're addressing outside of rule?
    • “What's the impact, and just…overall your support?”
  • She noted the April 9th session would be extended to two hours, giving staff additional time to hear from attendees. In the presentation, WSLCB reported more focus groups were scheduled to allow for two on each of the topics outlined.
  • With two focus groups held on definitional and endorsement language, on April 3rd, staff released two draft rule sections, one for WAC 314-55-095 on servings and transaction limits, and another for WAC 314-55-106 on the cannabis warning symbol. Meetings on those chapters were scheduled for April 9th and Friday April 12th.
  • Other sessions were then posted to the Policy and Rules page with additional implementation topics and new public engagements on the project through May 2024. An announcement outlined the enhanced schedule:
    • Workshop #3: Cannabis Product Packaging and Labeling (WAC 314-55-105) April 22nd and 23rd
    • Workshop #4: Quality Assurance and Quality Control Testing (WAC 314-55-102) April 26th and 30th
    • Workshop #5: Cannabinoid Additives (WAC 314-55-109) May 2nd and 7th
    • Workshop #6: All Rule Sections – Final Workshop May 13th and 15th