WA Senate LC - Committee Meeting
(February 9, 2023) - SB 5377 - Public Hearing

[ Event Details ]

Feedback on a bill to legalize out-of-state cannabis license ownership was divided: some companies anticipated benefits while others viewed the move as only helping larger entities.

Here are some observations from the Thursday February 9th Washington State Senate Labor and Commerce Committee (WA Senate LC) Committee Meeting.

My top 3 takeaways:

  • WA Senate LC Counsel Matt Shepard-Koningsor provided the briefing on SB 5377, “Concerning cannabis license ownership” (audio - 2m, video).
    • Out-of-state ownership of cannabis licenses was prohibited in law by Initiative 502, though there had been repeated attempts to change the policy and it had been cited by cannabis industry stakeholders as a prime method for businesses to find capital investment.
    • Owing to a tight agenda where non-cannabis bills had more people signed up to testify, Committee Chair Karen Keiser combined the hearings on SB 5733 and SB 5546, “Establishing a Washington state cannabis commission,” noting many speakers wanted to testify on both bills. While combined hearings were not without precedent when two bills had similar topics, SB 5377 and 5546 had little overlap beyond both pertaining to cannabis licensees, leading to testimony sign-in sheets that were less reflective of who actually spoke on both bills.
    • Reviewing the bill analysis, Shepard-Koningsor described the implications of the proposal:
      • Requires the Liquor and Cannabis Board (LCB) to suspend a cannabis producer's license if no activity has been recorded on the license after July 1, 2021, and for the license to be reissued to the licensee under certain conditions related to federal legalization of cannabis. 
      • Authorizes out-of-state ownership of licensed cannabis businesses. 
      • Modifies requirements regarding who must qualify for and be named on a cannabis license.
      • Permits LCB to impose additional licensing fees to recover costs associated with investigating certain non-residents.
    • A fiscal note from WSLCB showed costs of $699,939 for fiscal years (FY) 2024-25, and costs of $511,016 in subsequent fiscal bienniums spread across board staff, licensing, enforcement, and information technology divisions of the agency.
    • The validity of state rules requiring residency in order to hold a cannabis license were upheld in federal and state lawsuits brought by Idaho businessman Todd Brinkmeyer against WSLCB. Leaders discussed the case on February 8th.
  • Testimony from some in the cannabis sector backed the move to expand ownership of licenses to those outside of the state, positing the restriction was no longer serving its intended purpose.
    • 11 individuals registered their support of the bill (testifying, not testifying).
      • Brandon Park did not sign in for SB 5377, but provided support for the bill during his testimony on SB 5546.
    • Senator Ann Rivers, primary sponsor of the legislation, opined “it's been over 10 years since we started this journey, we are considered a veteran in the adult general use cannabis market, but there's something that's holding us back, and that is the access to capital from other states.” She remarked that “we are the only state currently engaged in the sale of cannabis who has limited its entrepreneurs from being able to engage” in out-of-state ownership, putting “our place on what has now become a global stage in jeopardy.” Rivers credited WSLCB staff “and others” for helping develop the bill, arguing “this business has been legitimized by people who are honestly trying to do the right thing to keep cannabis out of the hands of kids, and to meet a demand that exists in our state.” She then said the “questions on intricacies” of the bill would be “addressed by the proponents and…maybe some opponents” (audio - 2m, video).
      • Keiser noted the group had “heard this before, and I think we're pretty well versed in this issue” (audio - <1m, video).
      • At time of publication, Alaska law also required owners of cannabis licenses to be residents of that state.
    • Several existing cannabis licensees and trade association representatives made a case that limits on ownership could be compared to creating an “incubator" that had become "a cage,” arguing the bill was an attempt at “leveling the playing field.”
  • Other industry members and concerned citizens took issue with possible effects on smaller businesses—and the as-yet-unawarded social equity licensees—along with concerns over lack of previous action by regulators.
    • 24 individuals registered their opposition to the bill, and four signed in with a position of ‘other’ (testifying, not testifying). 
    • Shawn DeNae Wagenseller, Washington Bud Company Co-Owner, The Cannabis Alliance and Washington Sun and Craft Growers Association (WSCA) Board Member, thought that smaller businesses were unlikely to attract “international corporations” as investors and would be "wiped out.” She further felt that "we did small on purpose” and out-of-state financing was already permitted in rule (audio - 4m, video).
    • Two speakers from Black Excellence in Cannabis (BEC) objected to existing retailers having a "head start" in the market and search for investors. They preferred to "take care of our people first" by getting social equity licenses issued and businesses open before changing ownership laws.
    • Concerned citizens Jim MacRae and John Worthington were opposed to SB 5377.
      • MacRae said what made producers active wasn’t defined and suspending them wasn’t “urgent” because WSLCB already “licensed 17.7 million square feet of maximum canopy.” He also viewed the bill as a “get out of jail free card for the people who broke that law and broke those rules over the last seven years” asserting such operators had not faced penalties from regulators (audio - 2m, video, written testimony). 
      • Worthington perceived no benefit in having “regulators and enforcement under the same roof” and didn’t want WSLCB leaders to “leave a body trail of small business.” He wanted to see local governments have a stronger role in cannabis business oversight, as he believed the agency had “been a disaster” (audio - 1m, video). 
    • Two speakers didn’t offer a position on the bill out of a desire to see changes, or due to a lack of consensus among their organization’s members:
      • Falcanna Owner and WACA member Bethany Rondeaux called for a clear end date for the activity clause and language to stop producers from updating previous reports to the Washington State Department of Revenue. “I understand there's language being worked on by WACA to address this issue and I'm supportive of their efforts,” she remarked (audio - 3m, video).
      • Cannabis Alliance Executive Director Burl Bryson conveyed that his members were “equally and passionately divided on whether or not it is time” for out-of-state ownership (audio - 2m, video).

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