WSLCB – Board Meeting
(June 12, 2019)

The Board adopted an interim policy on cannabinoid additives, heard a cannabis rulemaking timeline, and listened to public comment on the failings of the state traceability vendor, MJ Freeway.

Here are some observations from the Wednesday June 12th WSLCB Board Meeting.

My top 3 takeaways:

  • The Board approved an interim policy suspending the requirement that cannabinoid additives from outside the regulated marketplace be entered into the traceability system (audio – 7m, video).
    • Board Interim Policy 12-2019 was discussed the previous day during the Board Caucus and presented for adoption by cannabis Policy and Rules Coordinator Kathy Hoffman.
    • RCW 69.50.326 allowed licensed processors to use cannabinoid additives in marijuana products “for the purpose of enhancing the cannabidiol concentration” and permitted additives “obtained from a source not licensed under this chapter, provided the CBD product:
      • (a) Has a THC level of 0.3 percent or less on a dry weight basis; and
      • (b) Has been tested for contaminants and toxins by a testing laboratory accredited under this chapter and in accordance with testing standards established under this chapter and the applicable administrative rules.”
    • CBD product” is defined in RCW 69.50.101(d) as “any product containing or consisting of cannabidiol.”
    • WSLCB’s cannabinoid additive rules went into effect December 1st, 2018 as part of the 2018 Cannabis Legislation rulemaking project and established “requirements, restrictions, and quality assurance (QA) standards for CBD additives.
    • One such requirement was that cannabinoid additives be entered into the traceability system regardless of where they were produced. Although the traceability system can track additives or alterants created by licensed producers within the regulated marketplace, “it’s currently not able to trace products that are produced outside of that structure.”
    • Therefore, the interim policy’s purpose is “to suspend the current requirement” of WAC 314-55-109(3) requiring entry of test results into the traceability system for CBD products obtained from an unlicensed source.
    • Hoffman emphasized all other requirements of that section “remain in full force and effect.”
    • Hearing no questions, Hoffman asked for approval of the policy, which the Board adopted by unanimous voice vote.
  • In what is hopefully a new trend at Board Meetings, the agency provided the latest cannabis rulemaking timeline (audio – 5m, video).
    • Hoffman’s last rulemaking timeline was presented at the May 29th Board Meeting.
    • Cannabis Penalties (WSR 18-22-099, video). The substantial rulemaking project incorporated elements of Engrossed Substitute Senate Bill 5318. The agency had been consistently hosting workgroup meetings with stakeholders and planned to release a “draft conceptual rule set” soon. Hoffman announced her intention to host a “Listen and Learn” session to engage more stakeholders and the public before presenting the draft rule CR-102 on September 4th or 18th.
    • True Party of Interest (TPI, WSR 18-22-054, video). Hoffman anticipated having the CR-102 ready at the same time as the Cannabis Penalty rules to ensure alignment and allow time for “meaningful stakeholder engagement and feedback.” On June 10th, an internal workgroup began incorporating provisions of Engrossed Substitute House Bill 1794 in addition to “general housekeeping” the agency had already been considering.
    • Consultation Program (video). Hoffman was preparing to request that the Board approve opening a CR-101 on July 17th to implement SB 5318’s provisions on compliance education and consultation services. See the legislation’s final bill report, page 2, for details on new constraints around WSLCB Enforcement’s on-site visits intended to encourage education towards compliance without fear of incurring penalties.
    • QA Testing (WSR 18-17-041, video). The agency received a preliminary Small Business Economic Impact Statement (SBEIS) from Industrial Economics which encouraged staff to plan a second “Listen and Learn” stakeholder session on June 25th at WSLCB’s current offices focused on how to mitigate impacts of rules and to develop phase-in strategies. Hoffman expected a CR-102 would be ready in September.
    • Packaging and Labeling (PAL, WSR 19-12-029, video). With language in SB 5298 now law, Hoffman indicated the agency was starting “to do an internal rule review,” developing “risk mitigation” as well as phase-in strategies, and scheduling time with industry stakeholders. She anticipated “a CR-102 being filed at some point in early October” contingent on stakeholder response.
  • Gregory Foster, a member of WSLCB’s Marijuana Traceability Project (MTP) Advisory Committee, thanked the Board for adopting the new interim policy and called the circumstances a “very good illustration of some of the problems and challenges” Washington has experienced with its current traceability vendor, MJ Freeway (audio – 4m, video).
    • Foster, founder of Cannabis Observer, said the new interim policy “enables licensees to be compliant” when utilizing outside additives.
    • While the Board was “well aware” of the vendor’s repeated failings, Foster pointed out the bill legalizing use of cannabinoid additives from unlicensed sources was signed into law and became effective over a year ago and agency rules were adopted 6 months prior. He felt it would seem “a reasonable assumption” that the traceability system could be updated to accommodate outside additives in parallel with the rulemaking, but “with this particular software vendor, we found that your reasonable assumptions are never met.”
    • He reminded the Board that the last update to the state traceability system was in August 2018 and MJ Freeway “missed yet another deadline” in June which they agreed to in May.
    • Foster asserted the scope and size of the upcoming release increased the risk of problems, whenever it arrived. He drew attention to an announcement from the agency shared with third-party software providers which called for “a 24-hour shutdown” of the state’s legal cannabis industry to attempt necessary data migrations.
    • Foster argued that “industry patience” with MJ Freeway had already expired and urged the Board to “do what you can” to work with the company – or “do something else.”
    • Foster concluded by pointing out the announcement that morning by MJ Freeway’s parent company, MTech Acquisition Corp, of their issuance of an additional 215,475 shares of Class A common stock in exchange for a $2.2M investment: “It just doesn’t necessarily add up that [Washington State has] had this experience” with MJ Freeway while “it seems like they’re preparing to cash out and take advantage of other investors elsewhere.”
Here are shared documents for your review: