The Cannabis Alliance - WA Cannabis Summit - 2021 - Fortifying Washington State in Preparation for Federalization
(September 24, 2021)

Friday September 24, 2021 1:45 PM - 3:00 PM Observed
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Fortifying Washington State Cannabis in Preparation for Federalization

Rep. Shelley Kloba – Washington State Representative, First Legislative District

Rick Garza – Agency Director, Washington State Liquor and Cannabis Board

Sheri Sawyer – Senior Policy Advisor, Office of Governor Jay Inslee

Michael Corriea – Director of Government Relations, National Cannabis Industry Association

Moderated by: Caitlein Ryan – Founder of Sound Cultivation, Cannabis Alliance Interim Executive Director

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Observations

Legislative, regulatory, and lobbying leaders talked about preparing the Washington state cannabis sector for national legalization and interstate trade.

Here are some observations from the Friday September 24th Washington State Cannabis Summit panel titled “Fortifying Washington State in Preparation for Federalization” hosted by the Cannabis Alliance.

My top 3 takeaways:

  • Caitlein Ryan, the Cannabis Alliance Interim Executive Director and Board President, introduced panelists before the group offered their perspectives on federal and state policymaking, and the increasingly prominent Cannabis Regulators Association (CANNRA, audio - 2m)
    • Federal Perspective - Michael Correia, National Cannabis Industry Association (NCIA) Director of Government Relations (audio - 10m)
      • Correia said the coronavirus pandemic had impacted traveling and lobbying in Washington, D.C. He asked “everyone to go back in a time machine first to 2019,” reminding them of progress on the Marijuana Opportunity Reinvestment and Expungement (MORE) Act and passage of the SAFE Banking Act in the U.S. House of Representatives (US House) that year. Correia described the “wind at our backs” as NCIA staff prepared to lobby in 2020, but as the pandemic spread around the country “Congress’s priorities were not related to cannabis.” As lawmakers worked on public health and emergency funding measures, he didn’t feel comfortable making an argument for “a regulatory bill.”
      • Instead, Correia explained, NCIA lobbying focused on banking reform in 2020 as there was a “great case” for “getting cash out of peoples’ hands” in cannabis retail. He commented that the persistence paid off as representatives passed the SAFE Banking Act on April 19th, again as part of a defense authorization bill for a total of “five different times in the past two years.
      • Correia explained that in 2020, progress on the MORE Act was postponed until after the November election due to “a lot of discomfort from moderate Democrats to...do a legalization bill during a pandemic.” The US House passed the bill after the election in a bipartisan vote of 228 to 164 after several “issues with amendments that were written at the last minute.” Correia claimed in “a normal situation we wouldn’t support” such amendments, but the “political implications” and pressure from “proponents on the hill” encouraged NCIA to “get in line and support it.” He disapproved of regulatory and tax components, in addition to language about “felony convictions, so if you had felonies, you couldn’t be a part of the cannabis industry.”
      • In 2021, Correia suggested lobbying on cannabis legalization centered on the Cannabis Administration and Opportunity Act (CAOA) in the U.S. Senate after it was offered as a discussion draft by senators including Majority Leader Chuck Schumer. He’d been “deferring to Capitol Hill” for the first half of the year, but said he was trying to help senators “take the industry’s concerns into their language, and into their discussion draft.” Senators asked for responses to “very specific questions” on the draft within “six weeks,” he told the group, and NCIA staff reached out to their “membership tiers” before drafting a response. As the CAOA was not a bill, Correia said his organization was officially neutral on it, but without incorporating some of the NCIA recommendations, “I could see us having some issues with it.” Other organizations releasing responses to the CAOA draft included:
      • A potential sticking point was a “tax component” he described as “a tax on top of a tax on top of a tax.” He claimed that a review by NCIA Chief Economist Beau Whitney of Whitney Economics found that, as written, CAOA would “probably be worse than the current tax system with 280E.” Correia said the NCIA wouldn’t support “a legalization bill, and all it does is lead to consolidation, and all it does is lead to non-competitive entrepreneurship.”
      • Correia reported that the US House Judiciary Committee was preparing to “markup” the MORE Act the following week, which he called “the most important committee of jurisdiction” on the bill’s subject matter. He predicted that “they’re not going to be making changes to this bill” while remaining cautious and saying that NCIA members wanted “comprehensive reform” to try to “help the cannabis industry...across the board.” 
      • “Big picture, there are some concerns,” Correia noted, because “a lot of the narrative in D.C. is ‘advocates versus industry,’ and instead of being cannabis reform versus prohibitionists we’re pitted against each other.” His impression of other advocacy groups was that “unless you have comprehensive reform that addresses every issue in the war on drugs” and each “issue associated with the harms of the war on drugs and prohibition, well then, we’re not going to do it.” In contrast, he said, “NCIA’s position and my position is that incremental reform works just as well.” Passing the SAFE Banking Act would help the existing cannabis sector, Correia stated, but “our own champions on Capitol Hill, [Senators] Cory Booker, Sherrod Brown, and others...are saying they’re going to go out of their way to stop something...like that because it doesn’t go all the way.”
      • Correia concluded by remarking that when the 2021 Senate runoff elections in Georgia gave the Democratic party control of that chamber, “everyone in cannabis thought...we’re going to have cannabis reform.” However, the “realities of just cannabis and politics in D.C., to get anything done in the senate you need 60 senators to sign off on something like this,” he observed, “and the political dynamics are just not there.” He argued that the SAFE Banking act had more cosponsors and was bipartisan, and the MORE Act was opposed by moderate Democratic senators, including “Dianne Feinstein in California, Jeanne Shaheen in...New Hampshire, John Tester, Joe Manchin.” He summarized, “I tell people just to think of the math.”
      • Ryan commented that when the SAFE Banking Act passed in April “there was a heartbeat...where we all thought federalization was going to come here,” adding, “obviously, that didn’t last.” Disappointed that wasn’t the case, she asked Correia about cannabis as “a bipartisan issue” and if he engaged in “fruitful conversations with Republicans out there” (audio - 4m).
        • Correia felt that “when a lot of the Republicans are insurrectionists and should be arrested it's really hard to have honest conversations...but we still have to deal with the Republicans there.” He’d found that the party’s caucus opposed cannabis reform “across the board,” but indicated Congressman David Royce had been open to leading a “Republican alternative to the MORE Act to see what the appetite is with Republicans.” After eight years lobbying in D.C., Correia believed the party was “still not there.”
        • There was a generational component, he suggested, saying “younger Republicans that keep getting elected understand this.” He expected that in order to get a legalization bill passed, “you’re going to have a bill that’s not perfect, that someone has issues with, but we still need to be fighting for what’s right.”
        • Though not supportive of cannabis reform, while he was Senate Majority Leader in 2018, Senator Mitch McConnell was a prominent supporter and prime sponsor of the bill adapted for the legalization of hemp.
    • CANNRA Perspective - Rick Garza, Washington State Liquor and Cannabis Board (WSLCB) Director and CANNRA First Vice President (audio - 16m)
      • Ryan asked Garza about his role in “the establishment of CANNRA” and why he’d wanted to be involved with the regulators group. Garza reviewed the history of CANNRA, which grew out of informal Regulator Roundtables WSLCB staff had participated in, offering remarks similar to those he’d given other groups on March 25th and July 15th. He highlighted that part of the mission of the organization was to “ensure that as changes to federal cannabis policy are made they consider the needs of established markets like ours” while insisting that the group was “overall” neutral on the topic of legalization.
      • Garza mentioned the CANNRA CAOA response, suggesting it encapsulated “where we see ourselves going.” Garza suggested that the recommendations built upon a February 18th letter from CANNRA President Norman Birenbaum to congressional leaders. CANNRA members advocated for “a strong co-governance establishment of minimum standards for all cannabis products for human consumption/inhalation,” he remarked, as well as “legal banking.” Going over some of the broad changes proposed by CAOA, Garza argued that it “appears” to be similar to how federal officials authorize alcohol businesses. His central concern was that federal changes not “collide or conflict,” with Washington’s legal cannabis system, also wanting “the generation of tax revenue [to] be preserved for the states.” As Washington state already had the highest tax rate on cannabis, he was concerned that significant taxation added at the federal level could impact licensees. Garza also identified “hemp regulations versus cannabis regulation as it applies to delta-9-[tetrahydrocannabinol] THC and the issues that we had recently.”
      • Garza noted that CANNRA had hired Gillian Schauer as Executive Director, and that she was “from Washington state and a PhD.
      • Noting committees formed under CANNRA, Garza highlighted their outreach to other groups like the U.S. Food and Drug Administration (US FDA), the Alcohol and Tobacco Tax and Trade Bureau (TTB), and NCIA. “Michael, I think you were on a call that we had not too long ago,” he indicated, as CANNRA leaders learned what lobbying had already been occurring with regards to cannabis, as well as the views of federal authorities. Garza stated that the Special Committees met “about every two weeks” and mentioned that the organization had begun inviting cannabis industry “participants and panelists to provide us information.”
      • In December, he expected a group of CANNRA representatives would meet with the senators drafting CAOA to “share some of our concerns.” CANNRA was likely to recommend a “commission of the regulated states, both for medical and adult use, [to] work directly with the federal regulators,” Garza said, “because the details and the nuts and bolts come in the regulations, not necessarily the legislation itself.” For WSLCB leaders, a next step was speaking to the state congressional delegation “in the next month to two months,” he stated, adding that on July 1st, he and staff met with the office of Washington Senator Patty Murray. Garza commented that staff would be discussing the agency response with board members the following week before taking up their reply with officials in the Governor’s Office.
      • Correia shared that NCIA leaders were “really supportive of everything that CANNRA is doing,” in part because Congress was “definitely going to listen to the regulators.” He felt NCIA members were ready to be "a megaphone and a platform" for CANNRA. “Federal regulations need to enhance what’s already happening at the state level, versus trampling all over,” Correia argued. Garza responded that CANNRA members were trying to learn from NCIA staff since “we’re not lobbying in D.C.” (audio - 2m).
      • In the virtual platform Q&A, Cannabis Observer Founder Gregory Foster asked, "How is CANNRA funded?" Ryan qualified that CANNRA leaders “are coming from government agenc[ies], but you are also your own standalone organization,” and asked “how does that piece of the puzzle fit into the broader conversation?” Garza responded that member states provided “annual dues,” enough to hire Schauer who helped “guide us.” However, Garza remarked that most of the time contributed was “volunteer work” as “we don’t have much money.” The group’s federal role was to “inform” lawmakers rather than lobby them, he insisted (audio - 3m).
    • Washington State Office of the Governor (WA Governor) Perspective - Sheri Sawyer, Senior Policy Advisor (audio - 1m, audio - 3m)
      • Ryan noted Governor Jay Inslee’s “evolution...on cannabis and cannabis policy,” and asked Sawyer “what kind of conversations [are you] having in the governor’s office” about federal legalization. Sawyer said Inslee was on “a personal transformation with cannabis,” noting his comments on Real Time with Bill Maher when he said Washington had the “best weed.” She insisted that Inslee had “never tried” cannabis.
      • Sawyer said that as cannabis had been legalized in enough states that “one in three Americans live in a state...with adult use cannabis,” she joked that it could become legal in every state “and the feds will still be lagging behind.” Sawyer described Inslee’s ambition to “ensure that we’re poised...to have Washington state be successful when the feds do end up legalizing cannabis.” Inslee’s view, she said, was “isn’t this going to be like beer and wine?” pointing to the state’s “microbrews, and you’ve got a very successful Washington wine industry that's able to compete nationally and at the state level.” Sawyer shared his opinion that “we’re going to be fine” when federal legalization occurs, due in part to a “robust state of production,” but her counsel to him was that the state needed to have “our laws and regulations ready for when that does happen so that all of our licensees can be successful.”
      • “I know competition is tough,” Sawyer added, “and it’s going to get tougher” when cannabis is legalized federally. She wanted businesses to give her feedback on what laws needed to be changed in order to stay competitive with products from outside Washington.
    • Washington State Legislature (WA Legislature) Perspective - Representative Shelley Kloba, Washington State House Commerce and Gaming Committee (WA House COG) Chair (audio - 9m)
      • Kloba observed that, after several terms in the legislature, she was chairing the Washington House of Representatives (WA House) policy committee for cannabis and had found Cannabis Alliance members to be “a very helpful resource” for learning about the subject matter. She laughed about being a “nice” parent teacher association “lady” assigned to make policy for cannabis, adding that she’d “really found a home.”
      • Cannabis reform was “a big change,” Kloba commented, calling states establishing the policies part of “the gardens of democracy.” She viewed CANNRA as “a very formalized way that we can take all of that knowledge...put it together in a formal way,” and share it with federal officials. Kloba then listed several issues she considered important as government and industry prepared for federalization:
      • Kloba echoed Sawyer’s remarks, saying that elected officials and the cannabis sector had to collaborate “to review our current policies” with an eye towards whether they’d position the state for “the national market.” She suggested a “transition plan” that would be “triggered” by changes at the federal level. 
        • In June 2019, Oregon Governor Kate Brown signed Senate Bill 582 which established a system for legal import and export of cannabis contingent upon such interstate commerce being allowed via federal guidance or legislation. The organization Sensible Markets advocated for similar legislation in other legal cannabis states.
      • Correia agreed, recommending a consideration of federalism before interstate cannabis commerce was approved since every legal cannabis state was already convinced “they grow the best” cannabis. He drew a comparison with Washington apples (“which people associate with the state”) and hoped that state leaders would provide similar support for Washington cannabis as they had “a chance to do this right.” He analogized legalization with a dog who catches a car it had been chasing, only to ask “now what?” Considering the likely impacts of changes now meant “we can make improvements” while there was still time. Kloba pointed out that she and other lawmakers had begun considering federal impacts at a WA House COG work session on March 26th (audio - 3m).
  • Ryan moderated several questions for the group covering interstate commerce, pesticide testing, preparation for a national markert, issue advocacy by the Washington State Liquor and Cannabis Board (WSLCB), and activity in other states.
    • Interstate Commerce. The potential for states to import and export cannabis between one another was potentially “different from a federal market,” Ryan said, noting successful legislation in Oregon and interest in recreating that “here in Washington state.” She indicated another possibility was “a multi-state coalition” between governments “starting to poke the federal government a little bit.” Wondering what the governor and federal authorities would think of the idea, Ryan asked, “is the beginnings of interstate commerce prior to federalization...a good incremental push?” (audio - 2m)
      • Sawyer called the concept “something that the governor would potentially be supportive of,” but possibly a “big push in the legislature.” If such legislation were to reach his desk, “I can’t imagine why the governor would not be supportive of that.” Sawyer continued by saying Inslee would also back legislation “to prepare us so when that button gets pushed at the federal level that we’re ready, similar to what Oregon’s done.”
    • Pesticide Testing. Weighing how Washington policies “stack up” against other states, Ryan brought up the “prickly” pesticide testing issue, noting stakeholders had “been working on it for a long time without resolution yet, but we’re hopeful for this year, Mr. Garza.” She asked how a lack of required pesticide testing impacted “our ability to...be competitive on a federal stage?” (audio - 3m).
      • Garza pointed to the WSLCB rulemaking project on Quality Control Testing and Product Requirements that, once adopted, “are going to require pesticide testing for all products.” He said he’d been working with trade groups like the Cannabis Alliance to see that it was completed. Garza stated that there’d been complaints, “especially the [Washington Craft and] Sungrowers [Association] and some of the smaller growers about the cost” of such testing changes. “But, we can’t lag behind the rest of the country,” Garza responded, and couldn’t settle for only testing medically compliant cannabis products for pesticides.
      • He said the agency would look to “make other adjustments to take the burden off business, so that they can afford to pay for the pesticide testing.” Garza then mentioned Kloba’s remarks of how “smaller growers have been struggling and been sharing that for quite some time.” He noted complaints from licensed producers and processors about a lack of vertical integration keeping them from directly engaging consumers, saying the same thing occurred in the wine industry “when they had to go through a distributor” in the 1970s and 1980s. “As we look at the landscape growing,” Garza encouraged considering allowing “smaller growers to be able to succeed” by mimicking policies for direct sales and “tasting rooms” the agency allowed for wineries and breweries.
    • Preparation. Ryan asked the panelists what “you think your role is in helping our industry prepare for federal legalization?” (audio - 1m)
      • Sawyer began by saying “your association in particular and the other associations” had always been proactive in presenting legislative priorities to the governor’s office before a legislative session. She considered allowing for a “read” on how Inslee felt about a topic was “really key.” This avoided the possibility of a veto, which she recognized wasted the work of lawmakers and the industry. So keeping Inslee’s office abreast of the needs of the cannabis sector was “the best thing that all of you can do,” Sawyer explained, adding it could result in communication to lawmakers when he endorsed a bill, possibly helping it “move ahead.” She said commodities commission legislation was something she believed the governor “could support.” Ryan agreed such a commission was among the easiest “ways that we can start to prepare,” having been one of several in the group to testify in favor when the bill received a hearing (audio - 3m).
      • Kloba thought the most appropriate way for legislators to lead on federal legalization was “to have a very formalized review of our current laws and how they might serve us in the future.” She said “turnover” among lawmakers impacted the ability to “follow up” after the enactment of a law, “it might take you years to get something finally passed, and then you do, and now you’re not in the legislature anymore.” Kloba commented that she’d nicknamed this stage of legislating “the Dr. Phil question, how’s that workin’ for ya?” Expecting there’d be ongoing “tweaks and changes” to cannabis law, officials were starting to be more mindful of the range of cannabis products “and our responsibility as a state to mitigate any of the damages that it can cause.” She anticipated “continuous improvement” for the foreseeable future, adding that there was “a lot less of the partisanship around cannabis,” specifically among WA House COG members. Kloba’s hope was that bipartisan work could continue “and this assumption that bills are not going to necessarily, you know, die if they’re not the right party” (audio - 3m).
    • WSLCB Advocacy. Ryan noted a disconnect between an agency “mandate to not be a market influencer...but at the same time you are the direct regulatory body over our industry.” Beyond Garza’s position in CANNRA, she asked if he envisioned “any advocacy for Washington state, say, the way the governor might?” (audio - 5m).
      • Garza advised WSLCB staff meeting with industry representatives on the topic of federal reform to get their input on “three or four things” to best position the state cannabis sector for a national market.
      • He continued by saying the agency was getting ready to hear from stakeholders at a September 27th webinar on drafted request legislation on “Regulation of Cannabinoids,” an issue “that’s on my mind today” due to another summit panel on innovation in cannabinoids.Garza said there was an intra-industry debate where “some believe that it’s artificial, it’s synthetic, you shouldn't allow it into the marketplace; there are others who say ‘you’re not being innovative.’” He called for hemp and cannabis plants to be “regulated similarly,” saying the 2018 Farm Bill and WSDA hemp program led to “all these hemp growers...extracting for [cannabidiol] CBD, and then introduced it into our marketplace” for chemical conversion into THC. Garza said the legislature would have to take up the topic in 2022 and, while he understood there were differing viewpoints, he asked for “one voice, if possible” on the issue. He believed all “cannabinoids wherever they are...have to be regulated. They’re psychoactive, if they have THC in ‘em, more than 0.3%” as defined in law, so Washington state law would need to be updated for the “so-called artificial, or synthetic, cannabinoids.”
    • Other States. Looking outside Washington, Ryan asked Correia if there were policies “other states are doing really well that we might want to be focusing our attention on as we’re looking towards federalization?” (audio - 4m)
      • Correia reported that NCIA didn't take a position on regulations (“we don’t want to get into that fight”) but said it would depend on the “outcome” that policymakers and industry members wanted. Questions like “are the barriers to entry so high? Are the taxes so high” that only pre-existing “monied interests” can participate was one factor he saw regulators and stakeholders deal with. He felt that CANNRA gave federal officials a chance to hear their “regulators, their state politicians” encourage a “robust regulatory structure.”
      • Correia thought focusing on small business and “entrepreneurship” was a good approach. “We can learn lessons from alcohol” regulation, he commented, “but we’re not like alcohol.” A previous version of the MORE Act included a “cut and pasted” provision from different legislation, he told the group, “that said ‘if you have felony convictions you can’t work in the cannabis industry’...guess what? Everyone has convictions in the cannabis industry.”
    • Improvement. A less “positive” question, Ryan was curious about “one pet project in I-502 that needs to be revamped as you’re looking out at the federal landscape?” (audio - 7m)
      • Correia said “the biggest thing for me is the taxation.”
      • Kloba considered a “disadvantage of us starting out early” was not addressing social equity at the outset to “ameliorate the damage that has been done over time in specific communities because of the war on drugs.” She indicated that the Washington State Legislative Task Force on Social Equity in Cannabis (WA SECTF) was looking at how to remedy this and would be advising WA House COG on issues “we really didn’t consider in the beginning.”
      • Sawyer said, “we need to look at vertical integration, at least, at some level.” 
      • Garza repeated Correia’s remarks on the need to distinguish cannabis regulations from those for alcohol, as “there is so much more complexity to cannabis than alcohol,” which WSLCB had regulated for “80 years.” Because there was no federal regulatory support for cannabis, he said, there was far less research because higher learning “administrations are still conservative around this.” Garza noted one positive development had been that no retail licensees were paying taxes in cash, all were “doing it electronically, there is no more cash.” He mentioned that regulators hadn’t anticipated that cannabis reforms would attract people “from out of the state to grow illicitly, not for the market in Washington,” but for unregulated cannabis markets in other regions. Garza called it a “huge” problem in southern Oregon, and said regulators were going to insist upon more “funding to go after all these illicit grows.” Ryan suggested this pattern might “naturally” start to subside as there were more cannabis “laws that make sense” allowing for the industry to “survive and thrive.”
  • The panelists offered some concluding thoughts on national legalization and changes that could come out of the following year’s state legislative session.
    • Kloba noted the “unprecedented” 2021 state legislative session, largely conducted virtually, had received “more participation from the general public than any in anybody’s memory.” She said the situation led lawmakers to “overcome the tyranny of geography" by increasing accessibility and lowering “barriers” to participation in lawmaking. Whatever the public health situation looked like in January 2022, Kloba promised that lawmakers had a goal to “try to maintain the level of participation that we saw” in 2021. Beyond continuing to speak to your representatives, she asked the group to assume “that legislators don’t know a whole lot about cannabis - you’re probably going to be right.” In all, Kloba thought “the more we know, the better policy we can create” (audio - 3m).
    • Correia repeated that NCIA members supported comprehensive change to cannabis laws, “but we’re also realists and accept and want” incremental progress like the SAFE Banking Act. He encouraged people to advocate for the banking bill through social media to Senator Booker who was “misguided” for wanting comprehensive change before taking steps to help existing businesses. Correia called upon the group to be “good advocates” and leaders as one of the first states to legalize the plant. He pointed out that one of the only states with no legal cannabis policies whatsoever was Washington’s neighboring state of Idaho, whose residents he’d seen en masse shopping at cannabis retailers in Spokane during a recent trip. As Washington was reaping tax revenue from a neighboring economy “maybe it's good” (audio - 3m).
    • Sawyer’s final thought was for participants to “not be shy,” as she believed the governor’s staff would be better informed "the more we hear from you." Identifying areas with broad agreement among stakeholders could lead to “easy wins” she noted, even while “more difficult conversations like the one that’s happening...with delta-8[-THC] and delta 9” should also continue (audio - 1m).
    • Garza summed up his views by observing that “frequent flyers” offering public comments at WSLCB meetings were often “cynical, negative” and that this was “hard on the staff sometimes.” He asked the group to “assume the best of intentions” from WSLCB representatives and shared a story from “one of the largest retailers in Vancouver” who said Oregonians were coming to that store “because they have product that’s not available in Oregon.” Garza had heard from this retailer that there were “about 244 retailers in the city of Portland...many of them are struggling.” The licensee attributed the cross border shopping to the quality and variety of his store’s offerings, Garza said, offering the anecdote as a contrast to the "negativism [that] kind of gets in the way of the work we want to do” (audio - 3m).

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