WSLCB - Board Meeting
(October 9, 2024) Summary

Board members adopted final rules for THC regulation, hosted a public hearing on cannabis product samples, and started a project on Employee Stock Ownership Plans.

Here are some observations from the Wednesday October 9th Washington State Liquor and Cannabis Board (WSLCB) board meeting.

My top 3 takeaways:

• Board members adopted rules implementing SB 5367 related to tetrahydrocannabinol (THC) regulations following a presentation by staff, with a cannabis trade group leader praising the action during public comments (audio - 5m, video - TVW, Rulemaking Project).
  • The 2023 law dealt with expanding the definition of THC to include more minor cannabinoids like delta-8-THC, a move meant to aid enforcement against hemp-derived synthetic cannabinoid products. In June 2023—more than a year before the meeting—the board opened the implementation project. Staff hosted focus groups that year and several more in spring of 2024, the most recent on May 2nd. Board members had reviewed the proposed changes during the previous day’s board caucus. 
  • Policy and Rules Manager Cassidy West requested the board's approval to file the CR-103 to implement the changes to THC rules, noting the intent of the law “to address the rise of intoxicating THC compounds and products that emerged onto the market in response to the unintentional loophole that was created by the 2018 Farm Bill.” She reported that the legislation had significantly changed how THC products were regulated, including new definitions of “THC concentration,” "cannabis product," “package,” and "label," and that the rules needed to be aligned with these new requirements.
  • After noting the rulemaking history, which included not only focus groups but surveys, informal discussions, and other engagements with interested parties, she observed “this was somewhat of a longer engagement period than typical, but we were amending six rule sections.”
    • West stated that after a September 11th public hearing, the WSLCB had received comments from the Washington CannaBusiness Association (WACA) and the Cannabis Alliance, who had expressed concerns with the proposed serving size limits in WAC 314-55-095.
    • She added that public health and prevention partners had submitted similar comments, requesting an expanded list of cannabinoids to be tested and expressing concerns about the low THC beverage transaction requirements put forward for WAC 314-55-102.
    • West stated that the final rules were amended to include a list of cannabinoid compounds not subject to the serving size limits because they do not have intoxicating effects. 
  • West explained that an error in the original language, which had removed the 10-unit allowance for cannabis-infused products, had been corrected. She mentioned that there would be an uncommonly long 90-day delay until January 7th, 2025 for the implementation of the rules after filing. This would “allow time for the transition to occur with lab accreditation between [the Washington State Department of Agriculture] and LCB, and should help ease the compliance burden for labs and licensees to adjust,” she said.
  • Board Chair David Postman expressed support for the THC bill and stated that it would help stabilize the industry in Washington by plugging a regulatory loophole that led to “the most damaging thing to [a] smartly run recreational adult cannabis market,” an unlicensed sector of ingestible hemp cannabinoid products (audio - 1m, video - TVW).
    • Postman expressed his hope that “Congress would do what we're going to do here, because I think then we'd stabilize the industry across the country. I think this helps a lot here.” He remarked that studies had shown that Alaska and Washington were the hardest places to obtain hemp-derived THC, but that the ability to obtain these products online or in neighboring states had made enforcement more challenging.
    • Postman commended staff for their work on the rulemaking project. He acknowledged that it was a complicated piece of legislation with challenging rulemaking, but concluded that it was a good product that had benefited from input from scientists, the cannabis industry, and public health and prevention partners.
    • Before a vote to formally adopt the rules, Postman added, “I think it should be a model. I know some other states are starting this similar process—that have legalized cannabis—and it'll be interesting to see how it grows.”
      • Governors in California, Georgia, and New Jersey have approved restrictions on consumable hemp products in 2024 though other efforts have faced pushback, including a lawsuit from hemp interests in Missouri, and the veto of a bill banning some hemp products in Florida.
  • Later during general public comments, WACA Executive Director Vicki Christophersen thanked the WSLCB for adopting the CR-103 to implement SB 5367. Her organization’s members viewed Washington as having the strongest laws in the country to regulate THC, and claimed colleagues in other states wanted to replicate Washington's work (audio - 2m, video - TVW).
    • “I have to put a plug in for what is known as the Miller amendment that is currently sitting in the Agriculture Appropriations Act in Congress,” she said,” offering her group’s “hope that that gets incorporated into the final budget, and that will close that loophole and help us…work with you” towards minimizing the separate hemp cannabinoid market.
      • Find out more from a June 17th white paper from the Congressional Research Service titled “Hemp Provisions in the House Farm Bill and FY2025 Agriculture Appropriations Bill.”
      • The Washington State Public Health Association joined a July 2nd letter to Congressional leaders advocating to keep the Miller amendment in the bill.
    • Christophersen also hoped that, with the adoption of the rulemaking project, the WSLCB could shift its attention to ensuring that THC remained in the regulated market, and towards helping regulated businesses sell safe THC products to the appropriate consumers.

• Policy and Rules Manager Cassidy West introduced the public hearing regarding cannabis product samples, with the same trade group representative offering comments (audio - 5m, video - TVW, Rulemaking Project).
  • West relayed that the proposed rulemaking was in response to a 2022 petition from WACA. She noted the petition was accepted in August 2022, though the rulemaking project wasn’t initiated until March 2023. 
  • West explained that the proposed rules included “a somewhat revised framework” which collapsed vendor samples and educational samples into a single “trade sample” category that could be used to negotiate sales on new products, engage budtenders on new and existing products, and for other educational purposes. She noted that the proposed rules allowed cannabis businesses to use “representative samples,” meaning that rather than being required to produce special sample sizes, businesses could pull samples directly from their inventory, although the maximum sample size could not exceed the smallest unit for sale offered on the market.
  • “We've received eight comments,” West told board members, including one “after the caucus yesterday, and the newer comments were on concerns with internal quality control sampling, generally, really more so about the limits.”
  • The only comment offered during the hearing came from Christophersen, who voiced her appreciation for staff’s work on the proposed rules, but requested that WSLCB consider allowing greater flexibility for internal quality control as well as research and development samples (audio - 3m, video - TVW).
    • Christophersen stated that, while WACA was “really happy with the trade sample section,” the organization had submitted written comments expressing concerns about the rules regarding internal control samples, and believed that “there needs to be a little more flexibility.” She suggested agency leaders look at how wineries and breweries conduct sampling, noting that they often offer barrel tastings and other forms of internal sampling which allowed employees to assess the flavor of the products and determine whether they were developing as intended.
    • Christophersen argued that concerns that cannabis businesses would use internal samples as an employee incentive were unfounded, stating that “cannabis prices are very low right now” and that people did not “come to work for a cannabis business in order to get a sample” because the samples were too small to serve as a genuine incentive. She offered the perspective that placing restrictions on the amount of cannabis a business can use for internal sampling would limit the ability of producers and processors to obtain feedback on their products. Christophersen urged the WSLCB to regard cannabis similar to other “regulated industries, just like wine, beer, and spirits and try to create the flexibility that is…in those industries.”
    • WACA had been “very clear” that samples should not be used as an incentive and that the rules should “explicitly state that,” argued Christophersen. Yet businesses also needed “enough flexibility to really do what they need to do” in regard to internal sampling.

• Board members initiated a rulemaking project which would evaluate the potential to allow Employee Stock Ownership Plans (ESOPs) in the cannabis industry (audio - 7m, video - TVW,  Rulemaking Petition).
  • Policy and External Affairs Director Justin Nordhorn presented the CR-101 to the board, explaining that their rulemaking process would include an informal comment period, internal meetings, stakeholder engagement sessions, a formal public comment period, and a public hearing, all before filing of final rules. Following from another WACA petition the board approved on May 22nd, Nordhorn explained that the group sought to amend the true party of interest (TPI) rules for cannabis businesses to permit the use of ESOPs.
  • Nordhorn noted that ESOPs are “already highly regulated,” and that Washington had established an employee ownership program through Substitute Senate Bill 5096, which was passed in 2023. He indicated that the initial scope of the rulemaking project was limited to cannabis businesses, but that the CR-101 was worded to allow the WSLCB to address liquor licenses if appropriate. Nordhorn added that there were “already some ESOPs in the liquor licensing area.”
  • Postman asked for a motion to approve the CR-101 and all three board members voted in favor of the action.
    • When Nordhorn discussed the project during the caucus, Board Member Jim Vollendroff had questions about the TPI concerns and found Nordhorn’s response useful.
  • During her public remarks, Christophersen also addressed the new rulemaking project, thanking board members for giving staff a chance to consider the use of employee stock ownership plans (ESOPs) in cannabis businesses. She expressed WACA’s enthusiasm for the rulemaking, stating that her organization was “really look[ing] forward to the conversation with staff to build a strong opportunity for cannabis businesses [to have the choice of] this important type of business structure.” She added that WACA had been “doing a lot of research” on ESOPs, and appreciated that the WSLCB had mentioned studies about them and had been giving a lot of thought to how they could be structured.

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