WA House RSG - Committee Meeting
(January 23, 2023) - HB 1341 - Public Hearing

Legislation to permit out-of-state ownership and suspend inactive producers received mostly supportive testimony, with opposition centered on equity implications from the change.

Here are some observations from the Monday January 23rd Washington State House Regulated Substances and Gaming Committee (WA House RSG) Committee Meeting.

My top 3 takeaways:

  • Ten people spoke in favor of the move, viewing regulation of inactive producers as necessary and out-of-state ownership as a boon to both operating cannabis businesses as well as those getting into the market through the State social equity program.
    • 14 individuals registered positions in support of the bill (testifying, not testifying).
    • Representative Sharon Wylie, the bill sponsor as well as the committee Co-Chair, said there’d been many cannabis policies “in that original initiative, and one of the big worries back then was to make sure that Big Pharma and Big Tobacco didn't come and take our homegrown businesses away from our local people…as this industry evolved.” But officials hadn’t realized “how drastic the lack of the ability to get capital would affect our farms and…our purveyors,” she said. Listing challenges the businesses faced including costs of operations, a “lack of being able to deduct the same things that other businesses deduct” in” federal taxes and other financial barriers, were among the topics the legislation could help, Wylie commented. She was amenable to adjustments to the bill, hoping to “take a broader look through the session and through the interim on how to make this industry better and…more equitable.” She was committed to “address the intersection with equity impacts on communities that have been affected by past laws related to cannabis that [are] not fully addressed in this bill.” Wylie also relayed that “some of the proponents of this bill” were open to lowering or removing the 10% limit for needing to qualify as a license holder, saying proponents would agree to the change “in order to have more transparency on ownership of the businesses” (audio - 3m, video).
    • The first two panels of supporters included industry representatives who said the bill would promote normal business practices, keep the state competitive in advance of a national cannabis market, and combat “oversupply” of cannabis - overall “good for business."
    • Others testifying in favor of the measure included:
    • WACA Executive Director and Lobbyist Vicki Christophersen said, “I think the case can be made that in the early days [a residency requirement] made sense” but now licensees “and those that will be in business” were “at a disadvantage in the access of typical financial tools.”
      • She echoed some prior remarks on the advantages of the measure to help businesses compete seeking to limit a “severe oversupply in our industry” that could exist should “several hundred unused producer licenses that have just been sort of sitting on the sidelines” become active in the expanded investor pool.
      • Christophersen added that WACA members “appreciated working with” Black Excellence in Cannabis (BEC) members on active social equity legislation. She noted the suspension date for inactive licenses under HB 1341 was “January of 2024, and we would anticipate that the current social equity licenses are being issued…starting in March” to allow those new licensees to seek additional funding (audio - 4m, video).
        • While an applicant window will conclude at the end of March, additional vetting and scoring of applicants by contracted firm the Ponder Diversity Group, remaining reviews by WSLCB and a license issuance by WSLCB, at which point applicants secure a lease and approval from local officials, processes which may add months before equity successful applicants can begin operations. 
      • Ranking Minority Member Kelly Chambers asked Christophersen whether a cap on the size of cannabis producers made sense after interstate commerce was authorized (audio - 1m, video).
  • One organization’s leaders argued the bill hurt the goal of ownership equity in the Washington cannabis industry and two business representatives had a more neutral view of the bill: one called for amended language and another suggested a new work group needed to be set up to offer “comprehensive” reforms in the future.
    • 25 individuals registered their opposition to the bill, and three signed in as ‘other’ (testifying, not testifying).
    • A leadership panel from BEC included President Peter Manning, Vice President Mike Asai, and Executive Treasurer Damien Mims. The group called the bill an “attempt to open up a market" which they felt minority communities hadn’t been given an equitable opportunity to access, helping only “current money makers.” They “respectfully demand social equity and [restorative] justice in the Washington cannabis industry."
    • Two commenters explained their positions as ‘other’ on HB 1341:
      • Falcanna Owner Bethany Rondeaux argued inactive producer licenses were more likely to be diverting cannabis from the legal market and had specific concerns on a “no activity end date in 2022” related to the license suspension requirement so as to “not give a window to keep shell licenses operational.” She also wanted language to keep such licensees from being to “modify [their] Department of Revenue wholesale tax report to modify that [they] have had activity to try to save the license,” and advised an inactive window of “July 1st, 2021 and December 31st, 2022” (audio - 2m, video).
      • The Cannabis Alliance Executive Director Burl Bryson acknowledged the “evenly and also passionately divided” views of their membership on removing the residency requirement, with some concerned about the ability of outside investors to “buy up licenses and use their monetary leverages to dominate the market.” He called for a new, dedicated work group “to investigate and propose a comprehensive package of changes” which should feature “measures like [a cannabis] commission, craft endorsement, and the opportunity for equity applicants to…secure sustainable and thriving businesses in this environment prior to allowing massive corporations to dominate” (audio - 4m, video).

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