WA Governor - Bill Action - Afternoon
(May 12, 2025) - SB 5403

WA Governor - Bill Action - Afternoon (May 12, 2025) - SB 5403 - Bill Text
[ Event Details ]

The Governor signed legislation limiting the power of management agreements to shape the cannabis marketplace, prompting rulemaking before the law goes into effect in 2026.

Here are some observations from the Monday May 12th Washington State Office of the Governor (WA Governor) Bill Action.

My top 3 takeaways:

  • Legislation more clearly proscribing constraints on retail financial interests in the Washington regulated cannabis marketplace did not start out towards that goal, having been overhauled from more contentious beginnings into an unusually well supported bill.
    • SB 5403 - Cannabis Retail Financial Interest
      • See the bill text, bill report, and previous fiscal note for more details.
      • On Tuesday January 21st, Senator Rebecca Saldaña introduced the legislation which, as originally written, would have authorized cannabis producers to sell their own flower directly to consumers.  The bill was referred to the Washington State Senate Labor and Commerce Committee (WA Senate LC) for policy review, where Saldaña determined legislative priorities as Chair.
      • During the public hearing on January 27th, a supermajority of the 23 people who testified supported the legislation, although questions were raised about market impacts.
      • A questionable fiscal note on the legislation was published on Friday February 7th which Cannabis Observer analyzed critically.
      • On Monday February 10th during a WSLCB work session hosted by WA Senate LC, Licensing Deputy Director of Administration Nicola Reid briefed committee members on cannabis license ownership constraints before lawmaker questions around management agreements suggested potential blind spots in agency oversight.
      • The cannabis farm gate sales bill had been scheduled for an executive session in WA Senate LC on Friday February 14th, but was reshuffled after Saldaña published an amendment on Thursday February 13th.
      • A second final fiscal note on the original bill was published on Thursday February 20th in which WSLCB staff marginally revised the estimated expense for software modifications.
      • Later on Thursday February 20th, Saldaña filed a proposed striker which aimed to rewrite the bill on a different subject:
        • “Strikes entirety of bill and instead prohibits a retail licensee and all other persons or entities with a financial or other ownership interest from entering into any agreement under specified law that confers a financial interest across more than five retail cannabis licenses.
        • “Provides that financial interest includes negotiating or coordinating purchases of cannabis products, any operational control over the business, sharing profits or revenue, sharing marketing and advertising costs, or sharing employment and hiring decisions.
        • “Adds an effective date of January 1, 2026.”
      • On Friday February 21st during the WA Senate LC executive session, Saldaña introduced the striking amendment by claiming her direct sales bill had been focused on making the cannabis industry more sustainable.  But a more pressing concern had been raised in the context of the hearings on SB 5403 and several other bills regarding de facto retail consolidation which she believed warranted timely action.  The proposed substitute was adopted and members recommended the legislation with some dissent.
      • The committee report was read during the pro forma floor session on Friday February 21st the same day as the House of Origin Policy Committee Cutoff and the legislation was referred to the Washington State Senate Rules Committee (WA Senate RULE) for calendaring.
      • On Monday March 10th, the legislation was included in a regular package pull and added to the chamber second reading calendar.
      • On Tuesday March 11th, Senator Curtis King published amendment S-2261.1 which was described as having the following effects:
        • ‘Changes the title of the bill from "AN ACT Relating to supporting a sustainable cannabis industry" to "AN ACT Relating to limiting financial interest agreements for licensed cannabis retailers."’
      • On Wednesday March 12th, the legislation was included in the fifth order of consideration and brought up in the mid-afternoon.  With the support of Saldaña, King’s amendment was incorporated into the legislation, greatly narrowing the scope of the bill to the subject matter of the bill text.  Saldaña then spoke at length to the rewrite of the bill and her intention to keep the regulated market restrained to ownership by Washington residents and curb workarounds to the five retail store limit as intended and defined by the Legislature (audio - 3m, video - TVW).  King also spoke in support of the legislation, which was passed 41-7-0-1 with one Democrat joining six Republicans voting against the legislation.
      • The bill was introduced in the House on Friday March 14th and referred to the Washington State House Consumer Protection and Business Committee (WA House CPB) for policy review.
      • On Wednesday March 26th during the public hearing in WA House CPB, members heard powerfully supportive testimony from across the cannabis sector and no opposition to the bill as written.  Emphasizing the statutory limit for individual ownership of five retail stores, testifiers recounted stories of larger conglomerate organizations exercising buying power to suppress wholesale pricing, require one-sided deals, and force the end of multi-year business relationships between retailers and processors.
      • On Monday March 31st, amendment CLOD 357 by Representative Kristine Reeves was published and described as having the following effects.
        • “Adds that the proposed prohibition on retail cannabis licensees entering into certain agreements that confer a financial interest across more than five retail cannabis licenses applies whether or not payment is exchanged. Modifies the proposed definition of a ‘financial interest’ for purposes of the prohibition as follows:
          • “changes ‘negotiating or coordinating purchases of cannabis products’ to any assistance, coordination, or recommendation for the purchase of cannabis products whereupon pricing is coordinated or discounted;
          • “adds the common use of intellectual property assets such as branding, trade names, logos, social media accounts, and websites;
          • “adds any operational support for typical day-to-day business operations, including core business or executive functions of the retail cannabis license;
          • “changes ‘sharing marketing and advertising costs’ to any sharing or coordination of marketing and advertising efforts or expenses; and
          • “changes ‘sharing employment and hiring decisions’ to any coordinated sharing of employment or hiring decisions, including the shared employment of individuals.”
      • On Tuesday April 1st during the executive session in WA House CPB, Representative Kristine Reeves described her amendment as providing more specificity and clarity to the bill language.  Minority Caucus Chair Peter Abbarno had supported the underlying bill language but opposed the change as he anticipated unexpected consequences.  Abbarno was conflicted about potential “retroactive” impacts on businesses operating under historically approved management agreements which may be found to be illegal once the new law went into effect.  The amendment was adopted by voice vote and the legislation was advanced in an 11-3-1 bipartisan vote.
      • After referral to the Washington State House Rules Committee (WA House RUL) on Wednesday April 2nd, the legislation was pulled by chamber leadership on Tuesday April 8th.
      • On Thursday April 10th, amendment CLOD 371 by Representative Kristine Reeves was published and described as having the following effects:
        • “Adds management agreements entered under existing authorization for cannabis licensees to have their place of business conducted by a manager or agent to the types of agreements subject to the bill's prohibition on agreements conferring a financial interest across more than five retail cannabis licenses.
        • “Specifies that the bill applies both retroactively and prospectively.”
      • In the late afternoon on Friday April 11th, SB 5403 was added to an order of consideration and the WA House CPB version of the legislation was brought up for its second and third reading.
        • In her remarks on the amendment, Reeves emphasized the provision specifying retroactive effect, acknowledging that was not how effective dates of statutes would normally be interpreted (audio < 1m, video - TVW).  Abbarno spoke against the amendment which he described as “retroactively interfer[ing] with contractual relationships” as “there's laws against such things and actions that could be taken” (audio < 1m, video - TVW).  The amendment was adopted 53-37-0-4 and the bill as amended was similarly adopted in a mirror 53-37-0-4 vote.
        • In her remarks on third reading, Reeves said the legislation was intended to address a “loophole” around the statutory restriction against ownership of more than five retail licenses made possible “under management agreements…the ability to essentially use branded material like your name or your signage, folks have figured out how to get around that five license requirement and have created a dominance in the market that I think was unintended” (audio - 2m, video - TVW).
        • Abbarno again spoke against the bill, testifying that “I don't know if I've ever worked into a contractual relationship where a law was passed that retroactively interferes with that relationship, and not only interferes with the relationship, but the business expectancy, especially after those two businesses not only entered into an agreement, but relied on it, invested in it, and now have invested in funds and have maybe strategically planned their businesses” (audio - 2m, video - TVW).
        • The amended legislation was passed 57-37-0-4 in a strictly partisan vote and representatives returned the legislation to the Senate for a concurrence, dispute, or conference vote.
      • On Friday April 18th, senators concurred with House changes to SB 5403 regarding cannabis retail financial interests, passing the third cannabis-related bill in 2025.
      • Lieutenant Governor and President of the Senate Denny Heck signed the legislation on Friday April 19th.  Speaker of the House Laurie Jinkins followed suit on Tuesday April 22nd and the bill was delivered to the Office of the Governor the next day.
  • On Monday following a brief delay, Governor Bob Ferguson signed the legislation into law.
    • Originally scheduled for signature during a ceremony on the morning of Monday May 12th, the legislation was rescheduled to the afternoon.
    • Situated as the last bill of the afternoon, Ferguson appreciated the “bipartisan support” for the legislation before acknowledging prime sponsor Saldaña and the influence of unnamed advocates, several of whom were present (video - TVW).

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