WSLCB - Board Meeting
(December 18, 2024)

Here are some observations from the Wednesday December 18th Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 7 takeaways:

• Following the departure of David Postman, Board Member Jim Vollendroff was appointed to be the new chair of the board (audio - 1m, video - TVW).
  • On November 13th, former Chair David Postman revealed he would be leaving the agency to work as chief of staff for incoming Attorney General, Nick Brown.
  • Both Vollendroff and Board Member Ollie Garrett had served as Acting Chair in subsequent public meetings, but at the board meeting Garrett offered her congratulations to Vollendroff for “becoming our new LCB Board Chair.” He thanked her and recognized her tenure on the board was longer than his,  acknowledging, “I only put my name forward after I heard that Ollie was going to forego” the chance to lead the agency once she “made it clear that she did not have time to be the board chair and take on additional commitments.”
  • Vollendroff then thanked Governor Jay Inslee and Governor-Elect Bob Ferguson for their support, adding that he would be finishing Postman’s appointment, which “expired in January of 2027.”
    • Vollendroff joined the board in May 2022, following a career working in public health, including with the Department of Psychiatry and Behavioral Sciences at the University of Washington (UW),” the King County Behavioral Health and Recovery Division, and as founding Director of the Harborview/UW Medicine Behavioral Health Institute. He discussed his impressions of the cannabis sector during remarks at a trade association conference in December 2022 and was a strong supporter of WSLCB setting up an internal Research Program in 2023.

• Staff provided their recommendation for withdrawing a rulemaking project on Employee Stock Ownership Plans (ESOPs) highlighting concerns that the policy could conflict with statutes related to license ownership (audio - 3m, video - TVW, Rulemaking Project).
  • On December 3rd, staff initially acknowledged they’d be seeking withdrawal when Acting Policy and Rules Manager Daniel Jacobs remarked on the “statutory concerns that we weren’t able to overcome.”
  • At the meeting, Jacobs described the background, stating Washington CannaBusiness Association (WACA) leaders submitted the petition in May, and the “complicated” idea elicited "substantial internal divisional concerns" around how ESOPs raised “questions over who would control and direct the cannabis licensees and whether out of state entities or individuals can be involved in ownership.”
  • Jacobs said there were several rules and statutes at play when it came to regulating ESOPs, and that after the board initiated the rulemaking project on October 9th, staff “discussions of possible regulatory framework solutions generally resulted in identified concerns and conflicts of existing state law.” Rather than continue the project, “we believe it's a better use of everyone's time to withdraw the CR-101, before legislative session starts, and give legislators the opportunity to address this issue during session, if they so choose,” he explained.
    • WACA leaders behind the petition hosted an interview with an ESOPs financier during their annual winter symposium on December 4th. Remarks at that event confirmed staff had been communicating their concerns before the petition was withdrawn, and organization members communicated their intention to pursue clarifying State legislation in 2025.
  • Board members voted to withdraw the CR-101 for ESOPs (audio - 1m, video - TVW).

• Acting Policy and Rules Manager Daniel Jacobs presented a recommendation to deny a rulemaking petition regarding captive insurance companies (audio - 5m, video - TVW, Rulemaking Petition).
  • The practice of captive insurance companies is a risk mitigation approach whereby businesses with specialized insurance needs establish and own their own insurance provider.
  • Jacobs stressed the complexity of the topic when presenting his recommendation for denial, urging those with questions about captive insurance companies to seek legal advice or speak to the Washington State Office of the Insurance Commissioner. After noting several relevant portions of statutes on insurance requirements for cannabis and laws on captive insurers, he said that officials had reached out to Insurance Commission staff. Were the law to be updated to allow cannabis captive insurers, both agencies would plan to coordinate on implementation.
  • “While the reference to Best[‘s] Reports specifically in the insurance rule may be a topic worthy of future examination via rulemaking, it isn't clear that now is the time to do so, or that combining that topic with captive insurance is the best way to do so,” Jacobs said.
    • Vollendroff raised the question of why a specific vendor was mentioned in cannabis insurance rules during the December 17th board caucus. Jacobs was unsure, noting it was an older rule developed when there were concerns about whether any entities would insure cannabis businesses.
  • Aware that the board had numerous rulemaking projects and petitions underway, Jacobs was certain “if we did accept this petition, frankly, it would go to the end of the queue and rulemaking likely wouldn't start for at least a year.” Another wrinkle was that Washington “law does not allow [captive insurance companies] to be domiciled in Washington. Instead, they need to be domiciled in a different state and registered to do business in Washington,” raising questions “about control, undue influence, and whether cannabis licensees can be allowed to have a subsidiary that's involved in non-cannabis business, really mainly insurance.”
  • Vollendroff indicated he was inclined to agree with the staff recommendation (audio - <1m, video - TVW) before he and Garrett voted to deny the petition (audio - 1m, video - TVW).

• A presentation on SB 5080 implementation preceded the adoption of final rule language for revisions to the social equity program (audio - 5m, video - TVW, Rulemaking Project).
  • Director of Policy and External Affairs Justin Nordhorn reviewed the rulemaking project with elected officials on December 10th. The project was initiated by the board in June 2023.
  • Presenting the CR-103, Nordhorn went over changes to the eligibility criteria for equity applicants, and revisions so that the process “includes a clear framework for ownership and control and implementing measures to verify the eligibility of applicants.”
  • Nordhorn mentioned outreach work which had been conducted, including filing a supplemental CR-102 to incorporate the public input from a September 11th public hearing even though doing so delayed the project. One of the key updates to the rules he described was the splitting of the application windows to allow those unsuccessful in getting a retail license the opportunity to apply again during a later producer/processor license window.
  • Nordhorn also mentioned changes to license mobility rules, but stressed that mobility allowances for retail title certificate holders hadn’t changed from earlier drafts. He added there were “no new comments” during the follow up public hearing on December 4th, and so there’d been no significant changes to the rule language.
    • Nordhorn specified a non-substantive, technical change had been made to wording in WAC 314-55-570(4)(A)(i)(d).
  • Garrett voiced her appreciation for the internal “5080 team,” recognizing how “a lot of time and effort went into this” (audio - 1m, video - TVW).
  • Vollendroff was similarly grateful, being "impressed with the amount of stakeholder input we've heard.” He didn’t regard the rules as “perfect,” but staff had “done a great job from my perspective" (audio - 1m, video - TVW).
  • The board voted to adopt the SB 5080 rule changes, which were slated to go into effect on January 18th (audio - <1m, video - TVW).

• Jacobs called attention to two more rulemaking efforts, noting the availability of materials around tetrahydrocannabinol (THC) definitions and a new petition seeking to direct cannabis revenue towards counseling and research.
  • SB 5367 Implementation (audio - 1m, video - TVW, Rulemaking Project)
    • The final THC rules referenced a list of non-THC compounds agency officials planned to post on the agency website prior to the effective date on January 7th, 2025. Jacobs commented the WSLCB website “got a fantastic revamp recently, and so while we posted it last week, it didn't migrate over.” He promised the list of non-THC cannabinoids had been re-added to their site.
      • In late November, Cannabis Observer inquired about the unpublished list with former Policy and Rules Manager Cassidy West prior to her unexpected departure from the agency.  Cannabis Observer inquired again with Policy and Rules staff on December 11th, after which Nordhorn shared the list and had it published on the WSLCB website the same day. The Observer followed up again on morning of the board meeting to note the list had not been included in the website transition, and encouraged Jacobs to broadcast its renewed availability more widely.
  • Cannabis Revenue for Counseling and Research (audio - 1m, video - TVW, Rulemaking Petition)
    • Jacobs also referred to a cannabis rulemaking petition received by staff which would have a recommendation prepared by January 29th.
      • Petitioner Ash Sjodin founded Grown Folks 502, which published a social equity plan.
    • He shared that the petitioner was seeking to have cannabis funding support post-traumatic stress disorder (PTSD) treatment and research related to the war on drugs and that Policy and Rules Coordinator Jeff Kildahl would prepare the recommendation.

• After the introduction of the public comment period with updated guidelines from the new chair, many participants welcomed Vollendroff in his new role and had feedback for the board relating to transparency, cannabis sector equity, and the relaunch of the WSLCB website.
  • When recounting the guidelines for general public comments, Vollendroff added a new stipulation that if “we have any disruptions, I will pause public comment until the disruptions stop and ask that the individual leave the room” (audio - 1m, video - TVW).
  • Christopher King (audio - 5, video - TVW)
    • King warned that "a federal agency" might soon begin an investigation into WSLCB, and the agency owed organizers of CantannaFest an apology for their “heavy handed” enforcement posture around the concert. He reported seeing communications between WSLCB officers and organizers related to concerns “that they were allegedly requesting people to bring in samples for sharing and consumption…which did not happen.” He speculated on the origins of who complained about the situation to agency officials, and felt an apology by the board was warranted.
    • Referring to Garrett, King took issue with positive remarks offered by another public commenter on November 20th, saying they previously discussed how “there seemed to be some significant anomalies in numbers” related to a non-profit Garrett led, Tabor 100. He promised to “chase this down,” by pressing the issue with federal revenue officials and the board before Garrett’s term ended in August 2025, confident there was at least a “sloppy bookkeeper” at Tabor 100 and that there would be signs in their paperwork as “numbers were off by 10s of 1000s of dollars. I pulled recent 990, the IRS [Internal Revenue Service] site for [20]17, 18, and 19.” King pushed for an apology from Vollendroff, who insisted “we don't respond to questions here.”
      • At time of publication, the IRS 990 filings from Tabor 100 under their 501(c)(3) organization Employer Identification Number (EIN) 91-2013635 were available for 2018 and 2019.
  • David Rose, social equity applicant (audio - 4m, video - TVW)
    • “I've been in this program for over a year now, and…I thought you guys really wanted to see us succeed in this program, but I have come to the conclusion that every turn that you guys have a chance to do what's right, you guys do everything against us,” said Rose. WSLCB was “just set up to hold Black people down,” he argued, and blamed agency leaders for local government bans and moratoriums that impacted African American communities. Rose didn’t like the delay in allowing HB 2870 license mobility, “there’s no reason for that.” 
    • Rose claimed WSLCB staff “still show that perpetual hate to our community,” and that agency leadership wasn’t representative of those who’d been hurt by their licensing decisions. “You guys got 46 licenses and still only, like, three or four people got…stores. You guys are failing,” he concluded.
      • Director of Licensing Becky Smith provided more information to a legislative panel on December 10th, noting there were “four [applicants] with pending locations,” “five that have been issued,” as well as five title certificates that had been able to become licensed.
  • Peter Manning, Black Excellence in Cannabis (BEC) President (audio - 3m, video - TVW)
    • Manning voiced support for Vollendroff’s new role as chair, hailing the “great move” as the “right direction to combat the ills LCB faces.” But he also conveyed “reservations” about other officials at the agency, and noted there was litigation involving BEC members against WSLCB related to the license approval process used by the agency in 2015.
    • Public policy changes could “fix the past harms that corrects the future,” he argued, “we can't look past the people that we actually harmed and say that we're going to correct some type of future for them that doesn't make any sense. Anyone that says that is a fool.”
  • Gregory Foster, Cannabis Observer Founder (audio - 2m, video - TVW)
    • Beyond offering best wishes for Vollendroff as he took on the responsibilities of board chair, Foster was supportive of Vollendroff’s “encouragement for the public health education liaison to try to bridge gaps between the public health and prevention community and industry stakeholders.”
    • Foster brought up the revamped agency website, saying it was a “big deal” because of the difficulty in migrating resources and functions at that scale. However, he pointed out “we've seen some things that were lost along the way.” He noted this included a list of non-THC cannabinoids associated with SB 5367 rulemaking which Jacobs had already rectified, thanking him and Communications staff for addressing issues promptly.
  • Paul Brice, Happy Trees Owner (audio - 3m, video - TVW)
    • Positive about Vollendroff’s new role at WSLCB, Brice expected “if you hear some BS, you just won't pretend to be dumb about it…you'll address it.” Brice nonetheless had problems with the adopted social equity rules, believing many applicants moving on to licensure were going to get “out maneuvered, outplayed.”
    • He had several concerns about some alleged social equity success stories, noting that Happy Trees was among “four licenses…already existing retailers,” including Cloud 9 and Green2Go, “and we already know the next round” which applicants had the most points and may get licensed. Brice suggested “for anyone coming into this industry just to get used up in five years [because] it takes five years before, can buy one of these guys out” without the requirement that an entity assuming the license qualify as an equity applicant. He also expected that established retailers were “going to double down their efforts to try to get these licenses.”
    • Turning to the disproportionately impacted area (DIA) criteria used for social equity applicants, Brice argued “once a DIA, always a DIA,” taking issue with the process of segmenting DIAs based on time. He also maintained that title certificate holders shouldn’t be included with the equity program, viewing this as “a retailer that doesn't have a store can just find themselves a poor person and someone who had some type of offense or lived in DIA, and then now become Black or Browns or SEA [social equity applicants] like ourselves, is complete ridiculousness.”
  • Sami Saad (audio - 3m, video - TVW)
    • Saad also congratulated Vollendroff and spoke of his connections within the Sudanese-American community in Washington state. He also emphasized his history as a medical cannabis dispensary “pioneer” and said Garrett had misrepresented her outreach to former dispensary owners like himself and told him not to contact her after promising assistance. Saad also suggested he had problems with revisions to the equity scoring rubric changes included in SB 5080 implementation.
  • Vollendroff offered his thanks to public speakers for the “warm welcome” and commented that he would “do my best to live up to David Postman, who I hold in high esteem” (audio - <1m, video - TVW).

• While not scheduled, Vollendroff encouraged Board Member Ollie Garrett to share some background on cannabis social equity in Washington State, similar to comments she and staff had given to lawmakers the week before, despite interruptions which prompted the chair to have a member of the public removed from the premises.
  • Vollendroff invited Garrett to “share a little bit about the history of the social equity program. Since you've been around since 2016 it would be helpful to me if you could do that” (audio - 1m, video - TVW).
  • Garrett outlined some context around past licensing windows and licensee demographics prior to her joining WSLCB. She noted that beyond concerns raised by community members, there was agency outreach underscoring pervasive disparities in who was profiting off cannabis legalization. Garrett mentioned laws which established and subsequently modified the social equity program. Overall repeating her briefing to legislators from December 10th, she summarized that “staff became very committed to what can we do now? What we can do to create a social equity process…to try to go back and fix the lost opportunities” mentioned by interested parties (audio - 5m, video - TVW).
  • Vollendroff thanked her for the context, suggesting Garrett had “just shed some light on some things, that was helpful to me in terms of understanding the history and the LCB’s role” (audio - <1m, video - TVW).
  • Garrett insisted, “LCB followed what the legislators instructed them to do, and just didn't take an opportunity to step back…And I think it all came from being overwhelmed: 2,500 applications for 335 slots, and then…additional 1,800 applications for 260 slots” (audio - 1m, video - TVW).
  • As Vollendroff moved to offer concluding remarks, Saad continued to disrupt the orations, leading Vollendroff to have him escorted from the building by multiple WSLCB staff and plainclothes security personnel. Moving on, Vollendroff noted, “One of the things that I hope to maintain is the rule of order in these meetings.  I really need to have that, and I respect everybody’s participation in that process” (audio - 2m, video - TVW).
    • While many WSLCB budget requests were either not included or severely diminished in Governor Inslee’s proposed biennial budget, the decision package for WSLCB still included the $420K requested for “Security Services at Agency HQ.”
  • Vollendroff concluded with his observation on the legacy of cannabis prohibition and the drug war on communities of color (audio - 1m, video - TVW).
    • “When I worked at King County, my office was directly across from the King County Jail. I looked out at that literally every day, and I know that that facility is filled with people who live with substance use disorders, people of color, people who live in poverty. And so we have an obligation to do some, to right some wrongs, historical wrongs, and we're committed to doing that. We want to continue to engage in conversations to right those wrongs.”
    • “I sincerely am proud of the work of the LCB and the work that we've done to move us in the right direction. Do we have more work to do? We can always improve, and we will continue to work to improve. But we get better through participation from the community. We get better through, ourselves, listening to community feedback, and we'll continue to do that.”
  • He concluded, wishing everyone “Happy Holidays and Happy New Year, we'll see ya in 2025.”
    • At publication time, the next WSLCB Board Meeting was scheduled for Wednesday January 15th.