WSLCB - Board Meeting
(June 23, 2021) - Summary

The board heard from concerned cannabis stakeholders about legal, health, and economic risks of failing to enforce a prohibition on the use of synthesized cannabinoids in I-502.

Here are some observations from the Wednesday June 23rd Washington State Liquor and Cannabis Board (WSLCB) Board Meeting.

My top 3 takeaways:

• Several cannabis licensees called for quicker action against the use of synthesized delta-9-tetrahydrocannabinol (delta-9-THC) in regulated cannabis products.
  • Some cannabis stakeholders had called for board and/or enforcement action to stop the practice of adding synthesized delta-8-THC and delta-9-THC to products in the regulated marketplace during public comments on April 14th, April 28th, May 26th, and June 9th.
  • Lukas Hunter, Harmony Farms Director of Compliance (audio - 4m, written comments) 
    • Having voiced concerns at a previous meeting over hemp-derived cannabidiol (CBD) being converted into cannabinoids like delta-8-THC and delta-9-THC, Hunter wanted to know “how [synthesized cannabinoid] products have continued to make their way into the regulated market” and “onto the shelves” of retail stores. Hunter believed there was “clarity in statute about the illegal business practice of selling” items which he said “depreciate the value of our legal cannabis products.”
    • He cited a draft statement on delta-8-THC which had been sent to stakeholders on February 8th, saying the cannabis sector had “yet to see any enforcement action” on the matter. A former employee of WSLCB, Hunter stated that he’d seen the board “react far more timely to removing illicit products from the shelves.”
    • He acknowledged a “debate” about calling the delta-8-THC “synthetic” as an identical compound was “found naturally occurring in the cannabis sativa plant.” However, Hunter noted delta-8-THC was at “minor“ levels compared to what could be chemically converted, as extraction of the substance from cannabis plants “doesn’t really pan out financially.”
    • “A synthesization process” to convert CBD into other cannabinoids may have been more affordable, but it came at a cost to licensed producers who had been selling cannabis ”biomass and our distillate that’s used in a variety of products.” Saying he and others in the industry had found the situation “alarming,” he added that products with synthesized cannabinoids could “quickly be identified.” Hunter referenced “some products where you have 20 to 30% THC, and then the total cannabinoid count will be in the 80s to the 90s.” He said this “great discrepancy” of cannabinoids meant “presumably, delta-8 is making up that remaining percentage.”
    • Hunter saw “steps” the board was taking in regards to the issue, but indicated there were “residual byproducts” from the “conversion process, not for every conversion process, but it is easy to do with poor lab practices” which could potentially lead to “health impacts on our consumers.” 
  • Micah Sherman, Raven Co-Owner and Washington SunGrowers Industry Association (WSIA) Board Member, (audio - 4m) 
    • Regretting he was “once again” commenting on "illegal synthetic cannabinoids” in the legal market, Sherman called attention to “letters from lawyers floating around...that have been positing some pretty basic factual misrepresentations of what’s going on here.” He had written a letter to the board to respond to claims the substances were “not synthetic” as being “absolutely false” as those claims made a “conflation between ‘artificial’ molecules and ‘synthetic’ molecules.” He said that “all artificial molecules are synthetic, but not all synthetics are artificial,” which he called a “very, very basic fact of chemistry. It is not up for debate.” The situation didn’t need further research or “investigating, it needs action,” Sherman asserted.
    • “We cannot allow wealthy interests to continue to ruin our industry for their bottom lines,” Sherman commented. He viewed the board as regulating “market impacts” because state officials restricted his business “in every single way that they could” in constructing “the rules and laws of this market.” What the cannabis license holders could sell, to whom, and under what names, had been strictly limited already by agency officials and the state, Sherman relayed, “and now we’re being told that somebody can come in” with synthesized cannabinoids “and there’s still nothing being done about it.”
    • Sheman complimented the board for “the action that has been taken thus far” but accused the staff at WSLCB of “being negligent in their responsibility and it’s putting farmers out of business.” He argued “the law says it is your problem” as Initiative 502 (I-502) “gave instructions to the state to maintain an industry that had small farmers at the center of the productive capacity.” Sherman concluded that stopping these products was not the same as the board fining individuals “or throw[ing] them in jail...we just want clarity” in the face of obfuscation from “wealthy interests that are paying lawyers to confuse the situation.”
    • In concluding, Sherman alluded to his advocacy for craft cannabis legislation to support small farmers, saying he considered inaction on synthetic cannabinoids a distraction “preventing us from moving forward on the things that we really need to do.”
  • Jeremy Moberg, CannaSol Farms Owner and WSIA Board Member (audio - 5m) 
    • Moberg told the board that “the time has passed for action" on synthesized cannabinoids as individuals were “clearly” violating rules. Finding “some of these legal opinions” on the matter “absurd,” he termed the acts “legal contortionism” only trying to fuel “ambiguity.”
    • The legislation allowing CBD as an additive in legal cannabis items was intended strictly as “an enhancement for [cannabidiol], CBDs,” Moberg argued, challenging claims processors were “in compliance” when further converting CBD into other cannabinoids as “a crazy legal mumbo jumbo” board members shouldn’t indulge. Aside from the specific practice of synthesizing cannabinoids, he felt that rules for labeling and “disclosure on the solvents being used” were also being broken. He believed lawmakers who permitted CBD as an additive never intended “to undermine the existing licensees, and that is exactly what the current interpretation of” law by the agency was permitting.
    • Moberg said uncertainty around the law was “coming from wealthy interests that have already infiltrated this market, and to the extent we don’t know.” He had seen estimates of “60,000 liters” of “synthetics into the market” which replaced “up to 40,000 pounds of biomass that would be grown by licensees.” Moberg was left wondering about “all the other rules out there that...aren’t enforced” and speculated “anything” in I-502 shops could be hemp “until there’s a test.” Overall, he considered the situation a “breakdown” in the mandate of the board to regulate the cannabis market.
    • Moberg voiced public concern that “hemp and CBD products are coming into this industry” at the WSLCB Cannabis Advisory Council (CAC) meeting on January 6th.
  • Crystal Oliver, WSIA Executive Director (audio - 4m) 
    • Oliver expressed gratitude for Board Member Russ Hauge’s “leadership” on the topic and Board Member Ollie Garrett’s “careful consideration of the issue.” She insisted “immediate action” was needed because “the sale of synthetic cannabinoids is not allowed” despite licensees engaging in the practice “with no transparency or truth in labeling.”
    • Saying “the law is clear, CBD may only be used as an additive to increase cannabidiol content of a marijuana product,” Oliver alleged some processors were ignoring this and failing to tell consumers “what chemicals are being used.” Washington had no “regulations to effectively regulate nor test these synthetic cannabinoids,” the byproducts from their conversion, nor residual solvents, she noted, calling rules for cannabis quality assurance testing “insufficient.”
    • Oliver felt that “history can guide us to best protect public health and safety,” comparing recent developments in the cannabis market with the growth of the tobacco industry. She noted tobacco representatives pushed to allow the use of additives that had increased odds of misuse and “long-term effects from smoking” in order to help “their bottom line.” Cannabis stakeholders and regulators could learn from this history, Oliver said, but a “lack of enforcement of Washington’s current laws and rules is placing Washington on a trajectory where the only viable business model will be to sell synthetic cannabinoids...a future without marijuana farmers.”
  • Scott Berka, Aloha Botanics and BroCo LLC Owner (audio - 3m) 
    • Berka was also complimentary of Hauge and Garrett “for the clear message and direction of the dialogue that they’ve had” when discussing the “clear violation” of rules occurring through use of synthesized cannabinoids. Saying he’d become a cannabis producer “for love of the plant,” Berka talked about board member’s expectations for licensees to follow applicable laws and rules as a two-way street, with an expectation “for you to enforce” those same regulations. Inaction by WSLCB leaders sent “the wrong message,” he remarked, and was frustrating as he’d promised his mother he’d produce “safe” cannabis products.
    • Berka asked, "Are you really willing to risk your reputation in allowing this to continue?” Producers faced an “invasion of material” from outside Washington with "no documentation whatsoever" of inputs and the public couldn’t know “where it's coming from, nobody knows whether or not it's safe.” He called for the board to “make a motion and stop this, today."
  • Jeff Newton (audio - 2m) 
    • Newton recognized Hauge and Garrett “for their interest in hearing this topic,” and echoed others’ calls for enforcement action. Feeling it was “pretty clear that it's not allowed,” he wanted a “motion and a vote to disallow that.” Newton said the efforts to restrict synthesized cannabinoids in other states was evidence of the “health issues” related to the compounds, meaning a prohibition against them would not “be a pioneering thing.”
    • Since the I-502 market was established as “a very restrictive industry,” Newton communicated that “it really kind of boggles my mind” that regulators would permit “synthetic THC to be introduced into a market.” He found those most impacted were “the producers, and I can’t imagine having a marijuana industry...that in the end could very well have no cannabis producers.” 
  • Ryan Sevigny, Landrace Brands President and High Tide Ranch Owner (audio - 3m)
    • Sevigny joined others in lauding Hauge and Garrett specifically for their “strong understanding of what is happening.” Noting legal cannabis in Washington was “a closed system," he’d opposed the law allowing “the importation of CBD” which he felt “opened the box for the paradigm to even happen.” As delta-9-THC was “a regulated cannabinoid,” Sevigny believed there was “a direct link to try and drive action to halt the process.”
    • The top issue for Sevigny was “consumer protection,” as synthesis processes resulted in “a lot of unknown compounds left in the conversion mix that are unlikely to be...benign plant matter.” He believed if someone got ill “rather quickly” from products with synthesized cannabis, it would be due to “unnecessary risk” taken by agency officials in not acting sooner.
    • At publication time, Sevigny was also an adjunct board member of the Cannabis Alliance, which released a letter to the board on the topic later the same day. 
  • Dave Varshock, BroCo LLC Chief Operations Officer (audio - 2m) 
    • Another person to previously address to the board on the subject, Varshock was also grateful to Garrett and Hauge “for supporting the industry as a whole.” He added that Hauge’s background as an attorney meant he should “be listened to a little bit more thoroughly” on the interpretation of state statute.
    • Varshock claimed that “the industry’s going to demand liability at some point from someone” on the rules as “people are losing their jobs, their labor forces, their market share, investments, and public safety’s being completely ignored.” He’d heard that “political donations” were being made to influence cannabis policy making and seconded the comments of Oliver and Sherman.
  • Jason Poll, Gorge Gold CEO (audio - 2m) 
    • Poll thanked the board and agreed with the arguments already made, saying as a grower and “user of cannabis, I wouldn’t use any of these products.” He expected damages from use of products with synthesized cannabinoids would lead to litigation, asking “who pays for that?”
    • Since WSLCB staff had undertaken product recalls before, Poll found it “bizarre” that items with synthesized cannabinoids wouldn’t be pulled from stores. He feared that “the customers” would start looking for products outside of the legal system if they lost faith in it, and that “good actors” in the cannabis market were “being punished.”
  • Kara Jackson signed up to offer comment, but was unable to connect when called upon (audio - <1m, audio - <1m). 

• All three board members responded to the comments and criticisms they’d just heard and discussed what was already happening regarding processors converting CBD into other cannabinoids.
  • Hauge conveyed that he saw “this as a pretty straightforward matter" and noted that “LCB has a history of vigorous enforcement, particularly in the cannabis realm.” This made him question “why we're choosing this issue...to take our time" as the claims raised by licensees had been “backed up by what I’ve found out on my own.” Hauge hoped the board would agree to action to stop synthesized cannabinoids in legal products to keep industry members “and our experiment” with legal cannabis going. He said the state had “been doing really good work...showing how cannabis, a formerly illegal substance, can be regulated and utilized in the system.” But, he warned, the conversion of CBD into other cannabinoids created “the potential to derail" the work of officials in the state so far (audio - 2m).
  • Garrett offered that “all three board members are taking this serious,” and that Board Chair David Postman was “just as committed to this.” She said the June 29th Board Caucus would detail “what it is we can do as a board.” She was confident that they would have more information to “see where we can go forward” at that time (audio - 2m). 
  • Postman found it “clear from the SunGrowers talking points that I am seen as the bad guy here," which he considered “unfortunate” and “incorrect.” He referred to the board conversation at the June 22nd caucus and disputed aspects of Hauge’s characterization of the subject (audio - 10m). 
    • Postman knew “for sure that staff is not ignoring this” and doubted it was an “issue that we’ve decided to ‘take our time on’." While he “only had a few months experience as a board member,” having previously helped “to oversee” WSLCB as Governor Jay Inslee’s Chief of Staff, Postman felt part of why the board, “as an agency-wide entity, [was] successful is that it’s been very rigorous in how it goes about doing its business.” He felt the deliberate process used by agency staff on synthesized cannabinoids had been used on other topics, and found the policy and clarifying statements---that WSIA members “seemed to think was a homage to one part of the industry”---did specifically speak “to exploration of this question.”
    • Calling Varshock’s claim of political contributions influencing policy as “just a load of BS,” Postman addressed the accusation as “the last vestige of the unhappy here.” The idea “that it has to be corruption” rather than legitimate disagreement, “legal restraints,” and “policy considerations,” left him wondering how to engage with someone so distrusting.
    • Postman disputed claims of “regulatory capture” of WSLCB leaders, which he felt was equivalent to saying “regulatory corruption.” Having urged all those lobbying on the matter not to engage in personal attacks “and insult staff and board members and make these sorts of accusations,” he was seeing that interpreted “as opposition to the issue.” Postman said as chair he also had to think about the “integrity of the system” and board member commitment to impartiality in enforcement matters due to their role in rendering judgements in adjudicative proceedings. “We have that system and I’m going to protect it,” adding, “even if...you all think I’m the bad guy.”
    • Speaking to Sherman’s assertion that WSLCB staff were “negligent,” Postman said that was “demonstrably false” and officials were “doing what they should.” While acknowledging there was some “bad information they’ve been trying to sort out,” Postman admitted “there is an enforcement investigation” but offered no further information “‘cause I don’t know any more, I should not know more” at that point. Postman also considered Sherman’s statements of a “position by the board to not act on, on market impacts” to be untrue but had “heard lobbyists for other organizations say it.”
      • Postman talked about a “high bar” for emergency rulemaking the prior day, and how he didn’t think emergency action to mitigate “market impacts” was as viable as addressing public health and safety concerns.
    • Postman repeated his statements that the Open Public Meetings Act (OPMA) didn’t “allow a vote by the board at that special board caucus,” and that for people “led to believe something else, I’m sorry, but that’s not possible.” In his time on the board, Postman said board and staff had made clear in public meetings that this was “an iterative process” that was not attempting to address any one synthesized compound.
    • Moreover, the board was not the entity within WSLCB to “conduct investigations,” Postman said. He claimed to know that WSIA representatives were “attempting to do their own investigation,” and alleged Oliver had “suggested to one board member” to run “a rogue undercover investigation to get a product from China and have it delivered to LCB headquarters.” Instead, he wanted to be able to “sit down with different segments of this market...and talk about how to make these things work.” He worried that swift judgments of corruption meant “we’re not going to get anywhere.”
    • Postman said he’d told Sherman and Moberg in a private meeting that “there is market structure in our law” and it was the board’s job “to enforce the law” as determined by voters and lawmakers. “My feeling is, we should be working to protect what the voters outlined” and what state officials had implemented, he commented, but not act “at the behest of one segment of the industry, whether they grow outdoors or indoors.” Being thoughtful was not the same as indecisive or negligent, Postman argued, saying their rule development process was the same one that had been “complimented by many of the same people who now are accusing us of regulatory capture.”
    • Summarizing that WSLCB staff were “doing what this agency should do,” and not deciding “outcomes at the beginning" of a process, Postman expected that “my comments, obviously, won't calm this."
  • Hauge stated that board members “need room to do our work" and, while "reasonable minds can differ” on how much, they were “committed to a fair and equitable marketplace. It’s a question of how we get there" (audio - 3m).
    • “At no time did I demand an investigation,” said Hauge, saying the situation was “not about me getting my feelings hurt.” But he was hearing from “small farmers, who live from hand-to-mouth” who were being “undercut by a practice that, to me, on its face, is illegal.” 
    • “We recognize that this is something that has to be resolved quickly," Hauge noted, and all board members were “committed” to finding that resolution “because damage is being done. If not to the market then to our credibility...let’s fix this and let’s move.”
  • In closing, Postman repeated that the policy process at WSLCB was “happening as it should," though perhaps not fast enough for those who “believe there’s something untoward happening” (audio - 3m).
    • He was also unhappy about “emails being sent to board members about specific licensees" which he said staff screened because “it can taint the process.”
    • Postman hedged that the subject of synthesized delta-9-THC had been brought to the board’s attention by Hauge “on very short notice.” Referring to one of his first meetings with Oliver, he said he hadn’t heard her voice concerns on “synthetic conversion to delta-9” at that time. Postman added that as soon as Hauge sent an email requesting a special board caucus, “within hours...SunGrowers had started their letter writing campaign urging us to act.” Before the special caucus ended, he was receiving email criticizing him for being “corrupt and in the pocket of” the Washington CannaBusiness Association (WACA).

• Director of Communications Brian Smith gave a briefing on retailer participation in the Joints for Jabs vaccination campaign and announced the Washington State Department of Health (DOH) had been convinced to help.
  • Smith told board members the campaign to provide a free pre-rolled cannabis joint for those being vaccinated against coronavirus was picking up speed since agency staff sent clarification that the popup sites may take place in parking lots on June 17th. The program garnered significant media interest as well as public criticism after being proposed by a licensee on May 26th and announced on June 7th. Smith reminded the board that the incentive would be allowed until July 12th (audio - 5m).
    • Smith highlighted the tax allowance for participating retailers which wasn’t available to alcohol licensees in their vaccination incentive campaign which he’d found “pretty significant.”
      • For alcohol, taxes are assessed using a per gallon excise tax rate based on product type, whereas cannabis has as 37% excise tax on the value of the product. Using data from the Tax Policy Center, a standard drink of beer in Washington (12 fluid ounces) is assessed a tax of $0.024375 and a standard drink of wine (5 fluid ounces) carries a $0.033984375 tax. A June 2020 comparison from the Tax Foundation showed Washington cannabis was the most taxed among legal states.
    • “Our goal has always been about vaccinations, not consumption,” Smith commented, and while staff were unsure of “how many retailers have held clinics” since reporting to the agency was voluntary, he knew “at least 10" stores had. He’d heard reasons for the slow start of the campaign included hesitancy by public health providers to participate “due to the federal funding that’s involved,” uncertainty from DOH staff on “which providers were willing to actually host” clinics at retailers, or that “it was just plain difficult.”
    • Smith mentioned that he’d been coordinating with public health providers since the program began to “make it easier for them to be able to participate.” He announced that DOH officials sent a notice to health providers acknowledging “the choices that are being made at the local level” on whether to partner with cannabis retailers. Smith described how this communication included a form allowing health providers to opt-in to the campaign and be notified if there was a retailer in their jurisdiction wanting to host a clinic. He said he’d be meeting with a “policy group” before formally announcing that process to retailers.
      • Later that afternoon, retailers were notified about how to share their interest with DOH and be notified about the list of willing local vaccine providers.
    • Postman thanked Smith and members of the public who had taken interest in the campaign, remarking, "10 clinics so far is not bad."
  • Cannabis Observer identified nine retail locations where a popup vaccination clinic had taken place or were scheduled to at time of publication.
    • Uncle Ike's hosted a vaccine clinic on June 16th at 2310 E Union Street in Seattle, WA and had a second clinic scheduled for June 25th from 3pm to 5pm with 25 vaccinations available.
    • Apex Cannabis hosted a vaccine clinic on June 17th and 18th at 1325 North Division Street, Suite 104 in Spokane, WA.
    • Evergreen Market hosted a vaccine clinic on June 18th at 402 16th Avenue NE A-100 in Auburn, WA.
    • Remedy Tulalip hosted a vaccine clinic on June 22nd at 9226 34th Avenue NE at Quil Ceda Village in Tulalip, WA.
    • The Evergreen Market hosted a vaccine clinic on June 23rd at 4242 E Valley Road F2 in Renton, WA.
    • Cannabis and Glass scheduled vaccine clinics at several locations in the Spokane region:
      • 605 E Francis Avenue in Spokane, WA on June 24 from 1pm to 3pm.
      • 9403 E Trent Avenue in Spokane Valley, WA on June 24 from 4pm to 7pm.
      • 25101 E Appleway Avenue in Liberty Lake, WA on June 25 from 1pm to 7pm.
    • Birch Bay Budz was scheduled to host a vaccine clinic at 8125 Birch Bay Square Street in Suite 222 in Blaine, WA on June 27th from 3pm to 5pm with 22 vaccinations available.

Information Set