The Cannabis Alliance - WA Cannabis Summit - 2024 - Innovation in Cannabis Regulation
(May 10, 2024)

Here are some observations from the Friday May 10th Washington State Cannabis Summit hosted by the Cannabis Alliance.

My top 4 takeaways:

• The Washington State Cannabis Summit brings policymakers, experts, and industry members together to talk about innovation in the sector at the local and national levels.
  • While the Cannabis Alliance is a trade association, Cannabis Observer works in coordination with private entities that host events featuring public officials acting in their official capacities to document cannabis policymaking information of relevance.
  • Previous confabs include summits hosted in 2021 and 2022, as well as Governor Jay Inslee’s announcement of a cannabis conviction pardon program at the 2019 summit.
    • Other events hosted by Alliance members in 2023 included a March for Homegrow and a Medical Cannabis Town Hall.
  • The summit theme for 2024 was "High Stakes: Resiliency in a Shifting Landscape."

• Panelists from the Washington State Liquor and Cannabis Board (WSLCB), a national regulator association, a Washington cannabis licensee, and a licensee from Massachusetts introduced themselves.
  • Moderator Jessica Pichardo, Dockside Cannabis Operations Manager and a Cannabis Alliance Board Member, welcomed the panelists, expecting their “expertise and a lot of light to be shed on” the topic (audio - 1m).
  • Gillian Schauer, Cannabis Regulators Association (CANNRA) Executive Director, said CANNRA was “not an advocacy group, we focus on convening governments to learn from each other.” She planned to address some of the challenges their members had reported. “I'm not here to speak to specific policies in Washington state, but hopefully can speak to some of the trends that we've seen” outside of the state’s market. Schauer added that she had 20 years expertise “in behavioral science and public health and prevention drug policy” (audio - 1m).
    • A researcher who had also been involved with the Addictions, Drug, and Alcohol Institute at the University of Washington (UW ADAI), in 2023 Schauer participated in a February meeting of the WSLCB Cannabinoid Science Work Group; commented on the interest CANNRA members had in federal reforms that March, and spoke before in a US House subcommittee meeting on cannabidiol (CBD) and hemp in July.
  • David Postman, WSLCB Board Chair, acknowledged the board member and director structure at the agency, claiming it was “frankly, one of the strangest governance structures in the state government.” Despite cynicism about government regulators, he believed “there's so many issues that we agree on.” Even though there were “competing things” in cannabis policy, Postman tried to focus on achieving consensus and he considered there to be “a lot of room to have more progress” (audio - 2m).
    • Some of Postman’s earliest remarks as board chair were at the 2021 summit.
  • Micah Sherman, Raven Co-Owner, Washington Sun and Craft Growers Association (WSCA) Board Member, and National Craft Cannabis Coalition member, mentioned his work lobbying state lawmakers on issues like defining “craft cannabis” and allowing producers to make direct sales to consumers which remained “my chief policy goal” (audio - 1m).
  • Laury Lucien, Parabola CenterEducation Director, Massachusetts Cannabis Control Commission (MCCC) Advisory Board Member, and a cannabis licensee in Massachusetts and California, considered herself to be “low-key government but not high-key” as an appointee to MCCC where she was on the “Market Participation Subcommittee, and I chaired the Public Safety and Community Mitigation Subcommittee” (audio - 1m).
    • Lucien was also the Founder of Legally Great Academy, focused on assisting cannabis licensees succeed “through education, coaching, mentoring, and community.”

• Several moderator inquiries and responses from panelists dealt with different levels of government regulation, social equity, as well as public health and public safety.
  • Pichardo emphasized the differences in “federal versus state regulation,” asking “how has the tension between federal and state cannabis laws impacted the cannabis industry?” (audio - 8m)
    • Schauer suggested this tension was also present in state and federal policies on hemp. She felt the state legal systems created for cannabis were “really unlike anything else that we have…that's for sale in the country.” Schauer saw this having implications for the “architecture that we see of the markets, especially for the first states that were doing this, because they were doing this in an illicit environment where nobody had ever done this before.” One change she noticed was that an initial emphasis on “compliance and enforcement to try to sort of appease the federal entities” had shifted towards “things that are much more in the regulatory discussion now.”
    • The downside for Schauer was seeing “45-odd individual state approaches” to cannabis regulation, which created difficulties for both regulators and for businesses operating in multiple states. Schauer had taken a position with CANNRA thinking “there's some things that we can probably get everybody on the same page about” such as testing or packaging standards. What she’d found was that CANNRA members were contending with processes and policies “made through state legislatures, and they have different priorities, and they're being lobbied by different groups.” Schauer was convinced there would need to be a federal minimum standard adopted if there was any chance of bringing disparate state markets into alignment. She remarked that “we need federal guidance in spaces where the feds usually give guidance, and they're not, which is honestly one of the reasons that CANNRA originated because they needed a place to talk about what do we do.”
    • Federal inaction had “exacerbated the situation where policy as far as…the federal dynamic around research has also been challenged,” Schauer alleged. As a researcher, she didn’t feel federal rescheduling of cannabis would “just bang open the box on research.” Schauer felt moving cannabis from Schedule I to Schedule III federally “changes a couple of things…and then there may be some unknowns,” such as less bureaucracy to conduct research, “but they still have to go through the DEA [Drug Enforcement Administration] when they start, they still have to go through the FDA [Food and Drug Administration] when they start.”
    • Sherman also regarded cannabis rescheduling as "very much a mystery,” and while following federal changes to cannabis policy mattered, “the core of my business and my interest as a cultivator is really kind of fundamentally most influenced by the state regulations that we operate in.” Tracking national action on cannabis mattered, he argued, but was less impactful for day-to-day operations of a cannabis business than watching local cannabis law and rule development. Sherman pointed to the many ways state-level regulations impacted what he grew, plus where and how he sold it, and compared it with the patchwork of state systems for consumable hemp products, which were “sort of federally legal, but it's still up in the air about what can be done in every state.” He commented that when it came to lobbying for changes in Olympia, “we have an awful lot of work to do in that arena to bring us to a place where we can even hope to coherently respond to a federal status change. Were it to be litigated right now and just thrust upon us, we would be in a really difficult position.”
    • Sherman noted federal legislation could have a positive impact for the industry, pointing to the 2022 SHIP Act, which would have permitted “direct to consumer sales for cannabis products grown by a small cannabis producer, through the mail upon descheduling.” This had been a priority for him because it would outline the concept of craft cannabis where “we were looking to guarantee…that cultivators and consumers can have a direct relationship” which “for me [was] key to building a sustainable business ecosystem in the cannabis industry.”
  • Next, Pichardo mentioned social equity (“We've heard the buzzword a lot today”) and asked what the concept meant for cannabis regulation, noting Washington State was “still in the throes of building that program and getting equity licenses out.” She asked Schauer for a “national perspective on how that's going” (audio - 5m).
    • There was no demonstrably perfect system, Schauer replied, but “three pillars” of the approach were becoming clear: “equity in the marketplace…expungements…and then the other would be community reinvestment.” She acknowledged that many states had established social equity efforts related to cannabis, and that CANNRA members had been discussing the topic. She was in favor of community reinvestment, which “stands to have a really huge impact in disproportionately impacted communities. Not everybody who's been harmed by the war on drugs wants to, or can get a license.” In her personal view, “the market is shifting towards cannabinoid hemp, and we see a lot more sales happening in cannabinoid hemp now than we do in the state regulated markets,” concluding she remained “concerned about how we're advancing equity in hemp.” Schauer was convinced there were implications for cannabis tax revenue, which some jurisdictions had used for community reinvestment. She added that her members planned to discuss it further during the organization’s June meeting in Minneapolis.
    • Lucien agreed with the challenges around equity programs since they relied upon “defining what it means and who it" served without relying on “race-based restorative practices." Defining which communities had been negatively impacted by cannabis prohibition as a criterion for eligibility for the help of an equity program was key to directing resources to those communities. “I'm willing to say you have seen social equity applicants who probably should not be social equity applicants,” she remarked. While Lucien was an African-American woman, “I personally, almost feel like I shouldn't be qualified for economic empowerment,” she said. “Why? My dad ran the telecommunication department for Haiti, the country. He's an engineer, my mom is a freaking nurse, I'm a lawyer…I'm not the target, because I've never even come close to being arrested.” “We already know what we need to provide,” said Lucien, “community investors, we need to provide grants, we need to provide the real estate…but the ‘who’ is what we really need to come to the definition and consensus with.”
  • Calling on Postman to hone in on the social equity program at WSLCB, Pichardo wondered “how can cannabis regulation address the disparities…caused by past drug policies, especially in disadvantaged communities?” (audio - 6m)
    • Postman pointed out the 2012 initiative legalizing cannabis made no mention of social equity. He suggested the American Civil Liberties Union (ACLU) “brought…harm reduction” into the discussion, and “they came to the legislature to start building what that program looked like.” Postman observed that after Washington had legalized, in other states “when they do start to legalize, [social equity considerations are] part of the conversations from the start which I think is better.” Although no program had emerged as a clear success story, he touted a $200 million community reinvestment project which Washington lawmakers budgeted in 2022, suspecting it had “potential for the greatest good to come because it's got the most money going to it.” Postman then mentioned state officials had a hand in developing the legal market through cannabis licensing and “we have a responsibility to play a role to make it more equitable,” even if there were some “people in the industry who disagree with that.”
      • HB 2870—the 2020 law which established the equity program—was request legislation from WSLCB which agency leaders began developing in 2019.
    • “It's not something everybody agrees on, it's still a fight. And it is true, it's very hard,” Postman said, noting that board members had been steered away from a “race-conscious system" to ensure the program would sustain legal challenges. Yet, the remaining criteria had put a “burden” on applicants to prove eligibility, he argued. Postman urged industry members to welcome the competition of, and mentor or support new equity businesses, citing the Parabola Center’s 2023 paper: How to Federally Legalize Cannabis Without Violating the Constitution or Undermining Equity and Justice. “So understand that even when people get excited about rescheduling and descheduling, national legalization and decriminalization,” he told attendees, “social equity could be a victim in any of those things.”
    • Lucien returned to the importance of community reinvestment, observing that not everyone would want to work in the cannabis space. She suggested reinvestment dollars be made available for ancillary businesses, “it cannot just be licenses.”
    • Sherman felt the cannabis industry members “can do a lot,” but there were limits on their influence. He also argued cannabis businesses were not responsible for drug prohibition policies which resulted in the disproportionate harms equity programs had been created to remedy (audio - 1m).
  • Pichardo was curious “how has the legal cannabis industry impacted local and state economies? What innovations have emerged in this industry? And what are the implications?” (audio - <1m) Sherman also asked what it would take “for us to have an industry that, five years from now, ten years from now, people can come into, and…they can operate in and be successful at a small scale.” He felt making a market where businesses could thrive while still staying small and local was something “we need to permanently work towards having be an integral part of the cannabis industry” (audio - 11m)
    • When starting his business in 2013, Sherman recognized “transitioning industry from the illicit market to a regulated market was going to be probably one of the biggest transitionary moments that I had the opportunity to participate in.” He’d wanted to instill values in how the system was organized, who had a say in structural outcomes like supporting small businesses, and “making sure that community is in charge of how things go.” Sherman relayed that he saw the same need for community involvement in any social equity program.
    • Mentioning “what I like to call the ‘FIRE’ sector. So finance, insurance, and real estate,” he contrasted their interests with “what I call the real economy, which is what we do.” Sherman wanted to avoid having “a paradigm where the FIRE sector's interests are the guiding force in what we do and why we do it, which is the direction we're headed right now.” He hoped that policymakers and industry leaders could be “really clear and direct in that we want a cannabis economy that's primarily interested in the production of cannabis, and not the production of real estate profits, and not the production of insurance profits.” Sherman was further concerned as he considered the centers of those industries to be outside of Washington, further removing their goals from those of local business owners “that are touching the plant and know what's going on.”
    • Schauer chimed in that it was “a really pivotal time to talk about those market architecture questions because of the change that's afoot with cannabinoid hemp, and the change afoot with interstate commerce.” Looking at various legal and illicit markets for cannabis and hemp around the country, she wondered what would become the norm in the future. “Are we going to bring cannabinoids together somehow? I think it's really important to think about what survives in an interstate or multinational environment in your state. And this is a question that regulators are starting to think about,” she said.
      • SB 5069, "Allowing interstate cannabis agreements,” was signed into law in May 2023.
    • Postman shared that federal reforms and interstate markets were issues they heard about and "we need to get ready for it." He wanted interested parties to define their priorities and “go to Congress and say, ‘when you do this, don't lose sight of this piece here.’” Postman hadn’t seen a "parade of horribles" come to pass, speculating it was “because we all kind of overreacted at the beginning” and were cautious in establishing legal cannabis.
    • “I do want to say the cannabis industry is so much better than the alcohol industry in terms of…keeping the product out of the hands of children,” Postman added, noting the cannabis sector “across the country [was] operating in a professional manner.” Nonetheless, he knew there were members of the “legislature who say that the initiative was a failed experiment and should be repealed immediately.”
  • Pichardo asked “what the best practices are for ensuring public health and safety in cannabis regulation…and how we can, our state can ensure the cannabis products are safe for consumers?” (audio - 10m).
    • Schauer pointed to a paper from CANNRA on cannabinoid regulation and safety released the week before which covered seven areas of safe regulation. Without losing a focus on consumer safety, she called for continued engagement between regulators and interested parties, but “instead of saying, ‘I hate this regulation,’ come to the table with ‘here's a different way that we could do this.’” Schauer said she was always amenable to hearing what regulations the industry could do without “that don't compromise consumer safety.”
    • “We are focused more and more on public health, trying to help, we just added it to our mission statement,” Postman indicated. He said WSLCB staff met regularly with prevention and public health representatives, finding they “worry a great deal about everything.” He offered the example of retail signage, stating an interest in lowering the enforcement priority for advertising and support for making State standards less restrictive while giving greater control to local governments, only to get pushback from public health and prevention advocates. Postman reasoned that some people still “worry about normalization" of cannabis, even though “I think the voters normalized this in 2012.”
    • Sherman argued “the most important thing we can do for public health and safety in regards to cannabis policy is end the war on drugs. Because the harm in the war on drugs came from prohibition and from law enforcement…we need to disabuse ourselves of the notion that we need to solely focus on protecting ourselves from cannabis.”
    • “The only thing [at risk is] contaminated products and testing,” Lucien asserted, “all we're doing is we're actually empowering consumers with information. It's not protecting their safety.” She noted that public safety was among the oldest threats raised by prohibitionists like Harry Anslinger. While there was “very minimal risk with consuming cannabis,” officials still had a role in ensuring public education, remarked Lucien.

• Attendees had other concerns which also touched on social equity as well as packaging and tax implications.
  • Mitzi Vaughn, an attorney with Karr Tuttle Campbell and International Cannabis Bar Association Founding Board Member, commented that she’d represented “social equity applicants, licensees, and also contractors administering programs,” and seen "inevitable paternalistic characteristics" of the WSLCB program such as restricting resale of equity licenses (audio - 3m).
    • Schauer replied that this was another subject without a clear policy prescription in part because “if anyone can just sell their license then do you end up with a program that has no equity left in it?” She said “hybrid approaches” like controlling who could buy an equity license for some amount of time still amounted to “limiting people's earning potential.” Schauer also noted that this was another reason defining equity criteria was so critical “because as soon as we enter interstate commerce, if there's not a universal definition, like what happens to those programs, how do you preserve those programs?”
    • Postman concurred and advised engaging Representative Melanie Morgan who Co-Chaired the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) before resigning from the post in 2022.
      • Morgan was present throughout the day, as were Democratic Representatives Shelley Kloba, Christ Stearns, and Sharon Wylie.
    • Sherman theorized “conversations about selling licenses are often predicated on the limited licensure bringing value to the license outside of the value of the business.” He suggested, “if you want long term viability of those programs,” focus on creating a viable small business ecosystem rather than an artificial market for resale of licenses.
  • Andy Brassington, Evergreen Herbal President and Washington CannaBusiness Association (WACA) Board of Trustees Vice President, was curious to know what changes in the market panelists expected in the coming years (audio - <1m).
    • Sherman didn’t foresee changes in “day-to-day operations” for cannabis businesses, but hoped to see some rule changes “moving away from responding to prohibition into building something new.” He then advised having state agencies besides WSLCB offer resources and guidance to cannabis licensees, noting changes to combine cannabis and hemp regulation already underway at the Washington State Department of Agriculture (WSDA). He called for more reforms to turn the cannabis market into “something that's forward thinking and is trying to build the sort of ecosystem that we've been talking about all day” (audio - 3m).
    • Postman pointed to a rulemaking petition on Payment Flexibility at WSLCB—incidentally filed by Sherman—as one "common sense evolution" of the cannabis market. “I would say that one of the things I hope we see from us over the next two, three years is more of that sort of work,” he added, mentioning public health, public safety, and consumer education as priorities in updating rules for cannabis.
  • Walter Terry, with Panacea Cannabis, highlighted how Nevada regulations allowed for sample smell jars. He recalled, “when I was out in the gray market, the consumer made the decision based on how it smelled,” wanting the same policy for Washington (audio - 1m)
    • Postman joked that a “scratch and sniff” on a package could be helpful. He also acknowledged “from a different angle…If we had bulk flower, you wouldn't have as much waste from the packaging and…that would allow then for” the ability to smell the product.
    • Pat Wonders, a retail owner and medical patient stated that “sniff jars [were] available,” but not commonly used since “you have to inventory keep track of them and be accountable for them, and…they only smell for so long, and…you have to order them and then send it back. So it's cumbersome.” He further explained “if you've got good product, you can typically smell through” a package (audio - 1m).
  • Wonders pointed to the extreme taxation of cannabis in Washington state between the excise, sales, and use taxes—which tended to exceed 40% of the product cost—coupled with federal taxes which could hurt the viability of equity licenses. He also believed export of cannabis wouldn’t benefit retailers as much as “the bigger chains, the bigger growers,” before asking whether there’d been any discussion among officials about lowering taxes (audio - 4m).
    • Postman answered that on the issue of taxes, “LCB has historically, bravely and boldly taken no position,” and was typically only in charge of collecting them, not setting tax policy. However, some lawmakers would be looking for input on raising taxes on concentrates, he acknowledged.
    • Schauer relayed that the Alcohol and Tobacco Tax and Trade Bureau (TTB) at the US Department of the Treasury was certain to collect some form of cannabis tax under federal cannabis legalization. “And hopefully, there'll be a lot of stakeholders around the table to talk about what's already happening…in states and what that federal tax adds” to state cannabis markets, she said.