WSLCB - Board Caucus
(October 8, 2024)

Here are some observations from the Tuesday October 8th Washington State Liquor and Cannabis Board (WSLCB) Board Caucus.

My top 5 takeaways:

• Officials went over rulemaking efforts at WSLCB, including a new petition on traceability, plus projects involving the social equity program, minors on licensed premises, cannabis waste, and the transfer of laboratory oversight authority to the Washington State Department of Agriculture (WSDA).
  • Cannabis Central Reporting System (CCRS) Replacement Petition (audio - 1m, video - TVW, video - WSLCB)
    • Policy and Rules Manager Cassidy West explained to the Board that a petition had been received by staff on October 2nd which cataloged several problems with CCRS but the unnamed petitioner “does not identify any specific WAC [Washington Administrative Code] language that they would like to change, but just simply would like to replace CCRS" with “something better.”
    • WSLCB is required to respond to the petition by December 1, 2024 and West indicated staff would be presenting the matter to the Board with a formal recommendation at its first meeting in December.
      • With December 1st being a Sunday with no board meeting, agency staff would be expected to put forward a recommendation so the board can vote on any action related to the petition before that time in order to meet the 60 day deadline for petition responses set by Washington’s Administrative Procedures Act in RCW 34.05.330(1).
    • A July 2023 traceability-focused Request for Information (RFI) was issued by WSLCB seeking a third-party vendor to take the place of CCRS which quickly drew public attention. Director of Legislative Relations Marc Webster gave a status update on traceability work to a legislative committee on September 17th.
  • SB 5080 Implementation (audio - 1m, video - TVW, video - WSLCB, Rulemaking Project)
    • According to West, officials were writing new rule text for a revised CR-102 on the law modifying and expanding the social equity licensing program at WSLCB. Her team was aiming to file new proposed rules at the end of October or early November 2024. ”We want to take our time, make sure that we've incorporated stakeholder feedback appropriately, and so we'll keep you up to date on that,” she said. West did not provide a timeline for completing the rulemaking project beyond filing the supplemental CR-102.
    • Reactions to the prior proposed rules during a public hearing on September 11th were mostly negative. Commenters focused on concerns that retail title certificates, which had been included in the equity program, would be bought by people otherwise unqualified, giving them privileges like relocating and argued their inclusion would negatively impact the amount of licenses that reached communities most impacted by enforcement of cannabis prohibition. The title certificates were awarded to cannabis businesses which had been licensed but barred from operating due to local laws, including Angel Swanson, an African American licensee who lobbied WSLCB to allow certificate holders to relocate their license to any jurisdictions which would allow them in 2020.
  • Minors on Wholesale Licensed Premises (audio - <1m, video - TVW, video - WSLCB, Rulemaking Project)
    • West provided an update on the effort to allow minors related to licensees, or persons over 18 but under 21 who worked with a contractor, at a licensed premise. She explained, "We did have quite a bit of robust stakeholder engagement, so we're working on adjusting those rules right now, and so we're expecting to bring that 102 at the first meeting in November,” scheduled for November 6th.
    • WSLCB staff hosted focus groups on the project on September 16th and 19th after pushing back the planned CR-102 several times from the original forecast of July when the project was initiated on February 28th.
  • SB 5376 implementation (audio - <1m, video - TVW, video - WSLCB, Rulemaking Project)
    • West relayed that Policy and Rules Coordinator Jeff Kildahl “will also be bringing the 102 for…sales of cannabis waste" forward in November. West did not elaborate on the details of the rulemaking or the proposed language.
    • After the measure was signed into law on March 25th the board approved the rulemaking project on April 23rd, originally aiming for focus groups in June and proposed rules by July or August. Staff hosted a focus group on the rulemaking effort on September 4th.
  • Lab Authority Transfer (audio - 1m, video - TVW, video - WSLCB, Rulemaking Project)
    • The CR-102 with proposed rules pertaining to transfer of cannabis testing lab quality standards and accreditation authority to WSDA was set to be presented at the board meeting on November 20th, West told board members. She emphasized that agency Chemist Kari Trumbull was “working very closely” on the language with West’s team, and said “several sections are requiring amendments, and so we want to be careful with that.”
    • West stated that next steps in the rulemaking process involved “reviewing and discussing the rule changes with WSDA” and planning to hold a public hearing in December.
    • The project had been subject to delays since being filed on July 17th. With a minimum comment period of 35 days, West’s indication that a CR-102 would be presented November 20th would likely push a hearing date into late December, a time when the board has traditionally cancelled or avoided scheduling public meetings.

• The adoption of final rules related to a 2023 law involving tetrahydrocannabinol (THC) regulation, SB 5367, was planned for presentation at the Wednesday October 9th board meeting (audio - 5m, video - TVW, video - WSLCB, Rulemaking Project).
  • West noted the legislation, passed in May 2023 and effective that July, "made several [changes to sections of] Chapter 69.50 of the Revised Code of Washington” aimed at addressing less regulated cannabinoid products that emerged on the market after passage of the 2018 Farm Bill legalized hemp. The project was initiated in June 2023, and staff hosted several focus groups that year and several in spring of 2024, most recently on May 2nd.
  • Key changes West highlighted in the rules were updated definitions including a new definition for “total THC”; amending testing, reporting, and labeling requirements; and explicitly prohibiting production, processing, and sale of any synthetically-derived or semi-synthetic cannabinoid. The rules were developed in collaboration with other WSLCB divisions and the WSDA, she added.
  • Interested parties from the public health field and prevention advocates expressed concerns about the proposed serving limits for THC and other THC compounds while advocating for stricter testing and labeling requirements. 
  • West told the Board that the rules incorporated feedback from a cannabis trade association by including a non-exhaustive list of cannabinoids maintained by the WSLCB. Board Chair David Postman clarified with West that the rules will refer to the list, which would be available outside of the rules, giving both the WSLCB and the industry flexibility.
  • West said staff added a transaction limit back into WAC 314-55-095, which was inadvertently removed in the proposed rules, and corrected a “technical error that we needed to correct in one of our equations.” She explained that the CR-103 incorporated a 90-day implementation period, instead of the default 31 days after filing, to ease the burden on licensees and allow WSLCB staff to prepare for implementation.

• A rulemaking project agency representatives planned to initiate involved acceptable forms of identification for the purchase of alcohol and cannabis (audio - 3m, video - TVW, video - WSLCB).
  • Kildahl suggested the CR-101 beginning the project was going to be presented at the Wednesday October 9th board meeting. He stated that the rulemaking would address two petitions, explaining, “because both of these petitions address acceptable forms of identification regarding the sale, service, possession, and consumption of alcohol it is logical and cost effective to combine these…into a single rulemaking project.”
    • The date was revised up from the September 25th projected start date in the semi-annual WSLCB rulemaking agenda filed on August 22nd.
  • Kildahl explained that the first petition, received in April 2023, requested adding “Global Entry cards” to the list of acceptable forms of identification for alcohol purchases. A second petitionreceived in May that year requested removing references to RCW 66.16.040 from WAC 314-01-005, WAC 314-17-025, and WAC 314-17-110.
    • Board members discussed the possibility of permitting the digital ID system in place of physical IDs in age verification for alcohol sales at a sporting arena in April 2023.
  • Kildahl stated that the rulemaking would provide an opportunity to “examine the rules regarding acceptable forms of identification at large, and to make these rules in both categories more consistent with other state law.” He reported that if the Board approved the CR-101 there would be an informal comment period until November 20th.

• The public hearing for proposed changes to product samples was set for the Wednesday October 9th board meeting (audio - 3m, video - TVW, video - WSLCB, Rulemaking Project).
  • West shared that the rulemaking was initiated in response to a 2022 petition from Washington CannaBusiness Association (WACA) Executive Director Vicki Christopherson. Proposed changes up for comment included combining vendor and education samples into a single "trade sample" category, adjusting sample sizes to be more representative of products sold in the market, and changing “provision limits” from a monthly to a quarterly basis.
  • West stated her team also adjusted sample jar requirements “so that customers can view and smell the product and allow a little bit more flexibility for what licensees can do once they...aren't using the…display sample anymore.”
  • Stakeholder input on the proposed rules included support for combining vendor and education samples, concerns that increasing sample sizes could lead to overconsumption, and requests for a higher limit on employee samples given to budtenders. West stated that staff were contemplating adjusting the rule language to provide more clarity on the proposed changes.
    • While a September 25th public hearing on the project was postponed, Paper and Leaf General Manager Daniel Brown had traveled to provide comments in person, and pushed to reconsider mandating quarterly tracking and sample limit changes for buyers (audio - 3m, video - WSLCB, video - TVW). 
  • Postman confirmed that the public hearing would be hosted on October 9th. Under this timeline West anticipated a presentation for adoption of the rule changes would occur on November 6th.

• Also at the October 9th meeting, the CR-101 to start a rulemaking project which could permit Employee Stock Ownership Plans (ESOPs) was set to be introduced to board members (audio - 5m, video - TVW, video - WSLCB,  Rulemaking Petition).
  • Policy and External Affairs Director Justin Nordhorn described how the project lead, Policy and Rules Coordinator Daniel Jacobs, wasn’t available, leaving Nordhorn to preview the project “which will be presented for approval during tomorrow’s board meeting.” This project had also been petitioned by Christohpersen on behalf of WACA members, and Nordhorn further explained that, “[f]or background, an ESOP is a ‘defined contribution benefit plan’ just as a 401k is.”
  • Nordhorn addressed concerns regarding the true party of interest (TPI) rule: “I think as far as some of the concerns that are raised, we have in the past for licensing not approved things like a family trust or an IRA account. Those can’t be true parties of interest, and this has a similar flavor, if you will, to those types of things.” However, he observed that the “trust in this particular type of business structure is not a family trust, and it’s regulated heavily by both the federal government and Washington state.”
  • Board Member Jim Vollendroff observed, “there were concerns brought up about the true party of interest” and asked “where did those concerns come from?” He continued, “We’ve heard at the board meeting from a few people who’ve testified against this, and I’m, I’m struggling with…where that might be coming from…because to me, it seems like a positive for the industry” (audio - 3m, video - TVW, video - WSLCB).
    • Nordhorn responded, “I think it’s just the evolving nature of this particular topic. ESOPs are fairly complicated. I don’t think any of us really understood what an ESOP was in depth…prior to the rule petition.” He also noted “[a]nother concern, which kind of came out of those previous conversations was, how do we ensure…these ESOPs are not setting up in such a way that they would be…owning more than five retail businesses,” something not permitted under RCW 69.50.325(3)(b). 
    • Vollendroff was grateful for Nordhorn’s perspective, “it is very complex, and so I appreciate the detailed response to that question, and look forward to continuing to hear more.”