Retailers looking to sell a wide range of products and businesses seeking marijuana-processing licenses need to act now if they want to legally sell marijuana concentrates. The draft I-502 rules released by the Liquor Control Board last week allow retail outlets to sell “[m]arijuana extracts such as hash, hash oil, shatter, and wax,” but only if they are infused in other products. A marijuana extract alone does not fit the definition of a marijuana-infused product. According to LCB spokesperson Brian Smith, the LCB was inclined to allow the sale of concentrates but felt that their hands were tied by the initiative, which discussed only marijuana-infused products.

This is going to present problems to anyone who was planning to sell their extracts standing alone. If the rule stands, extracts will only be legal if infused in some type of edible good. This situation is also creating a legal uncertainty for many processors. Companies specializing in e-cigarette style vaporizers and mouth sprays, for instance, have no clarification on how much additive is necessary to mix with an extract in order to meet the definition of a “marijuana-infused product.” I-502 defined marijuana-infused products as those “that contain marijuana or marijuana extracts and are intended for human use.”

Processors looking to sell pure or close-to-pure marijuana extracts will be pushing the LCB to rethink its interpretation of the Initiative before the regulations are formally proposed next month. They will claim that the definition of infused products in the initiative — anything containing marijuana or marijuana extracts — is broad enough to include the extracts themselves. Because the LCB is already sympathetic to the processors’ position, there is a chance of expanding what is allowed for extracts.

If the rules on extracts do not change, they will do more than just hurt business; they also will subject those who possess pure hash, hash oil, or other extract to state law criminal prosecution. Because the possession rules in I-502 act as exceptions to the Washington Controlled Substances Act, deviations from those rules can land someone right back in the criminal system that I-502 sought to upend. According to Alison Holcomb of the ACLU, who led the I-502 campaign, the Legislature may need to step in to clarify the legality of possessing and selling marijuana extracts, which were not clearly defined in either I-502 or in the LCB’s draft rules. Otherwise, businesses and individuals may find themselves in a legal bind.

The Liquor Control Board (LCB) released its draft I-502 implementation rules yesterday. The public will have just under a month to respond to the LCB for comment. In mid-June, the LCB is expected to formally file its rules, beginning a regulatory timeline that would end in late August with the rules going effective at that time. This initial period, then, is the most effective time to change the rules. They are purposefully vague in certain areas, as the LCB really does plan on making adjustments over the next month based on the comments they get from the public. Moreover, BOTEC Analysis Corp., the LCB’s appointed expert consultant, still must figure out “demand” for cannabis in the state in order to determine plant count, operational space restrictions, etc. (all of which were notably absent from this first set of draft rules).

Here are only some basic areas of importance, as we see it, in the draft rules:

• We now have a full page of definitions of “sensitive use areas” relative to the 1,000-foot distance rule;
• There’s now a definition of a “lot,” encompassing weights for flower, trim, and “plant matter.”
• All applicants must be at least twenty-one (21) years of age.
• No license will issue for locations on Federal lands.
• No limits (yet) on either the number of production licenses or the maximum amount of production allowed under a single license.
• Confirmation that production and processing licenses are available for the same facility, along with the creation of a hybrid “producer/processor” license to accomplish that.
• There’s a (very short) 30-day application window when rules go effective, likely from September 1-31.
• There are extensive requirements for security equipment (including 24-hour surveillance) and seed to sale traceability software, as well as insurance.
• There are also requirements that license applicants and financiers (those who contribute more than $10,000 to operations) submit information on their criminal and financial histories.
• Applicants must produce for the LCB an affidavit from their proposed landlord that the property they want to use will, in fact, be used for I-502 operations.
• Submission of an (extensive) “operating plan” demonstrating applicants can meet I-502 compliance at all three levels of licensing (this includes a mandatory submission of architectural design and spatial drawings of the building).
• A criminal conviction point system under which an accumulation of at least eight (8) points renders an individual ineligible for license receipt.
• A prohibition on the sale of hash (unless it’s infused into other cannabis products).

At 46 pages, the rules are extensive and touch on many areas of concern. At their heart is an overriding philosophy of disclosure: disclosure about applicants, about business models, about site designs, financial resources, and about future changes in business or ownership structure. The LCB even gave us all their perspective on the draft, ultimately letting us know that they want our comments on these rules. All in all, it’s pretty clear, for better or worse, the LCB wants to have access to as much information as they possibly can in deciding whether a particular business will receive an I-502 license.

More details are certainly to come soon. But at least stakeholders finally have some guidance on how to begin their application planning strategies.

A recent Wall Street Journal article explores the economic challenges associated with growing cannabis, even in places like Washington and Colorado where state law allows growers to operate.  Highlighting a few growers in Colorado, the article discusses the relatively high production costs and other perils currently associated with the industry.

In light of the passage of I-502, we found the author’s attention to a Denver strain name particularly interesting.  The article mentions how Denver Relief created a strain called Bio-Diesel that won a quality competition in 2009.  Shortly after, the name started appearing in dispensaries around Denver, even though this was not the same product that had won the competition. The article identifies this issue, essentially trademark infringement, as yet another liability associated with the cannabis industry because the U.S. Patent and Trademark Office (USPTO) will not register trademarks for cannabis-related products.   In our opinion, the discussion does not end there.

First, in the U.S., trademark rights arise from using a name “in commerce,” and registering a trademark only serves to enhance those rights.  Second, even if the USPTO refuses to register a trademark for a cannabis-related product (nonetheless, state trademark registration) remains an option in many cases.  Third, to the extent a name is being used in commerce for other goods and services (besides products containing cannabis) there is a chance to achieve federal trademark registration for the name.

Keeping all that in mind, a grower using a strain name first has superior rights over others who infringe on that name, whether by accident or by intentionally trying to palm off their product for another’s.  Obtaining state registration of a trademark provides an additional layer of protection and gives exclusive rights to use a name within that particular state.  Registration, however, is not a guarantee of protection, and those who have developed trademark rights need to be vigilant about enforcing them if they want to maintain the integrity of their brand.  This means tracking down infringers and possibly taking legal action against them. With the advent of I-502, branding has never been so important in the cannabis industry.

On the flip side, we encourage those creating new businesses or products to choose original names and try to avoid creating trademark disputes which can ultimately distract from and damage a new business at a very formative stage.  In our experience, trademark disputes can arise between different cannabis-related businesses or can come from outside the industry.  Many companies are extra aggressive when it comes to perceived trademark conflicts with cannabis-related businesses as the industry continues to strive for legitimacy. For example, if you don’t want to be named a Defendant in a trademark lawsuit by Nordstrom, don’t name your retail location “Nordstrain.” Seemingly funny, these trademark lawsuits can be extremely expensive to defend.

While cannabis presents some unique challenges when it comes to intellectual property, this does not mean that these successful brands and significant investments are without protection. If anything, as you develop your branding, you’ll want to check in with a competent intellectual property attorney so that you can get all protections presently available to you.

We’re all seeing things we’ve never seen before when it comes to the national conversation and analysis over the legalization of cannabis. Some of it’s the usual police state rhetoric, but some of it certainly isn’t. And that’s worth writing about. Specifically, the Congressional Research Service (CRS), a trusted and extremely influential public policy research agency of the legislative branch (that’s also known as “Congress’s think tank”), actually sides with legalization on some key levels (but not on everything). Congressional leaders are actually out in the light talking about cannabis and the hypocrisy of the Federal government (gasp!). And public opinion, for the first time ever, clearly supports the legalization of cannabis. Still, there’s local rain on this parade. Namely, Washington cities, counties, and towns are continuing to test the waters with zoning restrictions on medical cannabis and, as a result, many wonder if these regulations will also extend to I-502.

The CRS report ultimately tells us that the Federal government really is mulling over its options relative to challenging Washington over I-502 in Federal Court. The report itself is a robust analysis of applicable case law regarding how the Feds have treated cannabis in the past. You’ve all been hearing for months about the Federal/State law conflict; essentially, although I-502 legalizes the possession, manufacture, and distribution of certain amounts of cannabis for adults, this doesn’t change the fact that Federal law still identifies those activities as Federal crimes under the Controlled Substances Act (CSA) (with the Feds being able to prosecute accordingly).

Despite the foregoing conflict, the CRS report makes it pretty clear that, if the Feds choose to sue Washington in Federal court over the decriminalization portion of I-502, it won’t necessarily be a slam-dunk case for them. To cut to the quick of it, the report essentially tells us that Washington’s decision to decriminalize up to an ounce of cannabis or less for adults is a lawful exercise of the State’s police power and not preemptable by Federal law. Unfortunately, the State’s plans to license and regulate cannabis, according to the report, “raise more substantial preemption concerns.” Without going one way or the other, the CRS admits that persuasive arguments could be made for both sides. And, while stakeholders may not agree with the 25% excise tax at each licensed level of operation, the report reminds us all that a State may in fact tax criminal activity. See Department of Revenue of Montana v. Ranch, 511 U.S. 767, 775 n.13 (1994) (citing Marchetti v. United States, 390 U.S. 39, 44 (1968)).

Now, onto the local issues the industry is facing from cities, counties, and towns. Current MMJ laws give the foregoing entities the authority to regulate MMJ activities in four distinct areas: zoning, business licensing, business taxes, and public health and safety requirements. Most recently, municipalities have chosen to experiment with zoning for MMJ access points. For example, the City of Seattle is proposing its own zoning regulations that would restrict growing and dispensing in certain areas of the city to only one collective garden and 72 ounces of useable cannabis. What I-502 stakeholders want to know is whether or not these types of MMJ zoning measures will also apply to their recreational operations. Given the painful “1,000-foot rule,” stakeholders are left wondering if any eligible commercial spaces will be left, especially if cities, counties, and towns can tack on zoning regulations in addition to I-502’s spatial limitations.

The Liquor Control Board (LCB) has indicated that it does not have the authority to tell the cities where to zone for recreational cannabis use. Frankly, if the 1,000-foot rule takes care of enough open space, the municipalities may do nothing at all. The ultimate worry for I-502 stakeholders is regarding those cities that still refuse to accept the reality of legalization; those that will try to unconstitutionally prevent recreational facilities from entering their midst (despite the new State cannabis laws). What we know for sure is that, while the LCB denies having any authority over local zoning directives, the Board has indicated that local zoning must not frustrate the intent of I-502 (which is mainly geared towards regulated access for the recreational market). So, while unconstitutional pretext is a worry, I-502 stakeholders should know that the State and the LCB are likely on their side should a city try to zone out recreational use because of lingering reefer madness.

We apologize for the delay in (briefly) blogging about this upcoming I-502 seminar. Nonetheless, on April 26, 2013, the Canna Law Group will be chairing a Continuing Legal Education (CLE) seminar on I-502’s affects and implications for Washington State sponsored by The Seminar Group. There’s a very knowledgeable line-up of speakers in attendance, including Seattle Mayor Mike McGinn and the Liquor Control Board’s (LCB) own staff attorney (Ingid Gourley Mungia, who will address for the crowd the details of the LCB’s rulemaking process under I-502) and board chair (Sharon Foster, who will address the LCB’s expectations throughout the licensing process).

Who should attend this seminar? While these types of seminars are usually geared towards lawyers, this one in particular, will also cater to I-502 stakeholders and other non-attorney cannabis professionals. So, if you have burning questions about I-502 (or about anything else relative to cannabis law in Washington state), we hope to see you on Friday.

Here’s the agenda for the day:

9:00    Introduction, Hilary Bricken, Program Chair Canna Law Group, (a practice group of Harris & Moure PLLC)

9:10    Overview of Marijuana Laws in Washington

Current Washington Medical Cannabis Laws; Criminal Ramifications of Violating I-502; the Green DUI, Aaron A. Pelley, Pelley Law PLLC

Potential Federal Ramifications; How the Initiative is Designed to Fend Off a Federal Challenge, Salvador A. Mungia, Gordon Thomas Honeywell

Amendment 64 and How Its Enactment Might Affect I-502, Christian Sederberg, Vicente Sederberg LLC, Denver, CO

10:15  I-502 Banking and Insurance Concerns

Business Insurance: What Coverage is Available for I-502 Businesses? Doug Banfelder, Commercial Insurance Specialist, Premier Southwest Insurance Group, Scottsdale, AZ

The Pains of Banking in the Cannabis Industry: What Happens with I-502 Banking? Robert McVay, Canna Law Group (a practice group of Harris & Moure PLLC)

11:00  Break

11:15  Washington Liquor Control and I-502

The Classic “Three-Tier Model” for Cannabis; the Criteria Required to be a Producer, Processor, or Retailer, and Market Controls: What will a Legal Cannabis Market Look Like? Addressing Concerns over Black Market Stimulation and Law Enforcement, Hilary Bricken, Canna Law Group (a practice group of Harris & Moure PLLC) and Sharon Foster, Board Chair, Washington State Liquor Control Board

12:15  Lunch (on your own)

1:15    Taxes and Cannabis Litigation

State and Federal Tax Liability Re I-502, Rob Braach, CPA, Braach Accounting Service PC, Missoula, MT

Cannabis Litigation: 280e and Landlord/Tenant Cannabis Laws, Henry G. Wykowski, Henry G. Wykowski & Associates, San Francisco, CA

2:15    State Government’s Perspective on I-502

Expectations for I-502 and Handling the Federal Government, Ingrid Gourley Mungia, Staff Attorney & I-502 Rules Coordinator Washington State Liquor Control Board

Employment Issues and I-502, W. Scott Snyder, Ogden Murphy Wallace PLLC

3:00    Project Finance

How Does I-502 Treat Outside Investment? Finding Investors, Legitimate Start-Up Capital, and Tax Ramifications, Troy Dayton, CEO, The ArcView Group, San Francisco, CA

3:45    Break

4:00    Seattle and I-502

The Authority of Cities, Counties, and Towns to Regulate Pursuant to I-502; Their Concerns over I-502; What to Expect in 2014, Michael McGinn, Mayor City of Seattle

5:00    Adjourn

While members of the press receive free admission, if you’re not a press person, but you’d like to attend, please phone The Seminar Group and give them the code “HIL-01” for reduced fee entry. See you Friday!

While cannabis tourism was certainly contemplated by Initiative 502, leakage of cannabis products into other non-recreational markets is a concern for both Federal and state governments. That concern is especially sharp in those cities, counties, and towns that closely border on those non-recreational markets. Moreover, international drug crime issues arise for border crossers into Canada (specifically for those crossers into British Columbia). So, how does I-502 affect any of the foregoing, if at all? The answer: cannabis is still a Federal crime and nothing changes the fate of border crossers who are willing to violate U.S. Federal and/or Canadian cannabis laws.

An interesting omission in I-502 is that individuals (21 or older) need not be residents of Washington if they want to acquire and use cannabis for recreational use while in the state. In turn, anyone that’s of age, from anywhere in the world can come to Washington for the sole purpose of recreational cannabis purchase and usage. Obviously, legal issues arise when these folks try to return to their homes of origin with their Washington grown cannabis. When addressing concerns over leakage, Governor Inslee has made clear that “[i]t is [Washington’s] responsibility to show the federal government we will be a responsible entity,” while at the same time stating that

“[t]he federal government probably won’t be too concerned about marijuana sold in stores making its way across the borders. The limit of one ounce per person in the new law is likely too small of an amount for federal agents to worry about.”

We don’t know if Governor Inslee got that latter point quite right. Canadians should be especially wary if they plan on crossing the U.S./Canadian border with their Washington cannabis. Cannabis is still illegal in British Columbia, but the laws are relatively lightly enforced. Nonetheless, U.S. Customs and Border Protection (CBP) routinely roams the Canadian border (and some nearby U.S. towns), and they’re ready and willing to bust those Americans and Canadians who try to cross the border with their cannabis products. CBP made it very clear to local media that “The state initiative did not change federal law.”

Still, CBP openly admitted that they see violations of this type on a weekly basis. What you may not know about CBP enforcement and cannabis is that, at Vancouver International Airport, where CBP has pre-clearance operations for people traveling into the states, officials are referring cannabis law violators to local law enforcement or fining them. Non-U.S. citizens are entirely blocked from entering. It’s important to note that, in all circumstances, whether it’s a felony-level quantity over 40 grams of cannabis or misdemeanor amounts less than that, border officials traditionally contact Homeland Security Investigations officers to inquire if it’s the type of case the federal government might wish to pursue.

The bottom line for border crossers? I-502 didn’t do anything to change the Federal status of cannabis as a Schedule I controlled substance and, in turn, no one should consider taking cannabis out of the State of Washington. Even if the Federal government relaxes its enforcement and defers to state law within Washington, it will certainly continue to vigorously prosecute interstate and international cannabis movement.

Stories are emerging that the Liquor Control Board has chosen Botec Analysis Corp. to be its expert consultant on implementation of I-502 regulations. Botec is a Massachusetts-based company that specializes in performing policy and economic research and analysis. Originally formed in 1984, Botec Analysis has worked with and evaluated government agencies on problems related to drug abuse, crime, and public health.

Botec’s President is Mark Kleiman, a professor of public policy at UCLA. To better predict Botec’s approach to I-502, we can take a look at Professor Kleiman’s background. He has a Ph.D. in Public Policy from Harvard, and he serves as an adjunct scholar for the Center for American Progress in addition to his faculty duties at UCLA. The majority of his scholarly writings focus on drug policy reform, though they do not expressly advocate for legalization. In a 1998 interview, Kleiman told PBS, “If we legalize marijuana or any other drug, either we will have a private industry whose profits depend on creating and maintaining addicts, or we will have a public bureaucracy whose revenues depend on creating and maintaining addicts.”

Professor Kleiman’s views on cannabis do not fit neatly into any particular box; his most recent writings on the topic can be found at his shared blog. It is clear that Kleiman is anything but a champion for large-scale legal commercialization of recreational cannabis. He believes that marijuana is habit-forming for a significant fraction of its users, and this habit has negative effects. In his opinion, any sort of commercialization effort will  likely increase its use in a non-desirable way. Also, he believes that private businesses involved in cannabis will necessarily have a financial interest in marketing and encouraging addiction. On the other hand, he recognizes that marijuana is less dangerous than alcohol, less habit-forming, does not lead to aggression, and has fewer long-term health effects. He recognizes that criminalized marijuana has wrecked communities and wrought immense harm on our society. In short, he is a policy moderate. He has clearly spent a significant amount of time thinking about drug policy, and he has spent the better part of his career thinking about the policy ground between criminalization and commercialization. For a good primer, here is a (long) lecture he gave on drug policy (cannabis section starts at minute 42:30).

The main questions, then, are why did Botec bid to be Washington’s marijuana consultant?; what are Botec’s goals?, and why did the Liquor Control Board choose them? While any answer is speculative, Washington offers something that any serious drug policy analyst would kill for: a controlled testing ground to actually monitor the effects of legalization. Kleiman likely wants to find a price point and level of regulation that significantly reduces the costs and consequences of prohibition without significantly increasing the damage from increased use.

For its part, the Liquor Control Board needed to choose an expert that did not have a financial stake in the regulations, one that was not likely to apply for an I-502 license, and one that showed the federal government that the Board was serious about controlling the market. By not giving the position to an established business interest, the Liquor Control Board has given the federal government some room to understand that Washington is seeking to legalize in a controlled way.

What does this selection mean for potential I-502 licensed businesses? First, remember that this is a consultant, not the be-all, end-all of determination. Ultimate decision-making power still rests with the Liquor Control Board. If they do follow his lead, however, we can make a few predictions. Advertising will likely be heavily controlled. Regulatory and taxation decisions will be made with a view toward hitting a sweet-spot final price that neither substantially increases demand nor encourages significant black market participation. Large companies may not get the licensing preference that they thought they might get, and commercialization aimed at increasing demand will be disfavored.

We will reserve final judgment on Botec’s installation as the Liquor Control Board’s consultant until we hear more from Professor Kleiman and the LCB. Stay tuned, as things will finally begin to heat up on the regulatory front.

Not surprisingly, former Drug Enforcement Agency (DEA) chiefs and the United Nations (UN) are calling for the Department of Justice (DOJ) to stop recreational cannabis markets from developing in Washington and Colorado under the States’ new cannabis laws. While the UN might have a dog in this fight because of various alleged violations of international drug treaties, for the DEA to continue to beat the dead horse that is the failed War on Drugs is absurd at this point.

The International Narcotics Control Board (INCB) of the UN is in charge of policing international drug treaties. The INCB has warned the U.S. about an allegedly growing public health concern over the legalization and decriminalization of cannabis because of an “unprecedented surge” in “legal highs,” ultimately calling for a focused global effort to curb the expanding cannabis trade. Raymond Yans, president of the INCB, said at the Board’s annual meeting in London that the legalization efforts in Washington and Colorado (in addition to Massachusetts becoming the 18^th state to develop medical cannabis laws) violate international drug conventions. Specifically, Yans was quoted as saying that the cannabis laws in Washington and Colorado “ . . . undermine the humanitarian aims of the drug control system and are a threat to public health and wellbeing,” and that America’s medical cannabis laws are little more than “a back-door to legalization for recreational use.”

According to the logic of the INCB, the State of California, alone, has been openly violating international drug treaties since 1996 without any well-publicized international impact or enforcement efforts. And while issues of Federal preemption have always swirled around MMJ laws in the U.S., there’s little to no evidence that the INCB will do anything but pontificate in the media about its disdain for the DOJ’s handling of cannabis legislation. The DEA is a different story, however, with a totally different rant.

To say that the DEA has a vested interest in the prohibition of cannabis is an understatement. The revenue the DEA is able to leach from the prohibition of cannabis on an annual basis is astronomical. As a result, it’s no wonder that former agency heads are coming out in support of a losing battle on prohibition; to them, it’s entirely likely that prohibition is about maintaining job security (especially in the face of an aggressive Federal sequestration).

In light of the foregoing, it’s not a shock that eight former DEA chiefs recently told the media that the DOJ needs to act now rather than lose its chance to nullify Colorado and Washington’s recreational cannabis laws. The former chiefs issued joint statements saying the Obama administration has reacted too slowly and should immediately sue to force the States to rescind the legislation. Mainly, this tiny group of former DEA agents is worried that Washington and Colorado may start a “domino effect” where more States will enact well-regulated recreational cannabis laws.

Peter Bensinger, head of the DEA under Presidents Gerald Ford, Jimmy Carter, and Ronald Reagan, told the press that “[t]his is a no-brainer . . . [i]t is outrageous that a lawsuit hasn’t been filed in federal court yet.” Since the Initiative took well into account a legal challenge from the Feds, we question whether Mr. Bensinger has even read Initiative 502 given his analysis of whether the DOJ should file against Washington. Interestingly enough, these DEA chiefs are not speaking from the individual good of their hearts. They are issuing their statements through the Florida-based Save Our Society from Drugs (SOS) that claims to be “. . . fighting against permissive drug policy that attempts to negatively impact our society and future,” but really only seems to attack various forms of cannabis legislation nationwide. The SOS website actually has an entire page on its website devoted to breaking down the alleged “Scam” perpetuated by medical cannabis.

While former DEA may continue to hound the DOJ and give inflammatory quotes to the media, Attorney General Eric Holder is the man to watch. Despite Bensinger’s consternation, it is important to remember that Holder (and not the classic cannabis witch hunters) controls the fate of recreational cannabis use in the U.S.

Since Initiative 502 (I-502) passed in November 2012, Washington state has seen a slew of legislative cannabis bills hitting the House and the Senate. If you’re not savvy with online bill searches, we’re here to help you. There are a few of these bills that, if passed, could single handedly determine the fate of both medical and recreational cannabis. Here’s a list of the relevant cannabis bills that have been dropped in the legislature through today:

• HB 1789 – Applies a 25% excise tax to sales of useable cannabis and cannabis-infused products in medical cannabis dispensaries.
• SJM 8000 – Reclassifies medical marijuana as a Schedule-II drug on a Federal level.
• SB 5528 – Provides arrest protection for medical cannabis patients, further clarifies the definition of a plant, clarifies the legality of delivery from collective gardens, and empowers the Liquor Control Board to study implementation of standardized medical cannabis cards.
• SB 5029 – Establishes a public bank in Washington. Not directly related to cannabis, but the bill would possibly allow for a branch of the bank to be devoted to cannabis businesses.
• HB 1876 – Increases the law enforcement authority of LCB officers to include I-502 facilities and operations.
• SB 5437 – Creates cannabis DUI for boaters.
• SB 5010 – Denies I-502 protection to those on probation.
  • SB 5222 – Mandates that Washington State University study industrial hemp.
  • SB-5279 – Disallows purchases of medical cannabis with food stamps.
  • HB 1084 – Seeks to rectify Governor Gregoire’s vetoes that now make up RCW 69.51A (Washington’s medical cannabis laws).
  • HB 1482 – Employs a zero cannabis tolerance policy for commercial drivers.
  • SB 5584/HB 1051 – Disallows cannabis names for certain public works.

In our opinion, the three bills to watch are HB 1789, SB 5528, and SB 5029 (with HB 1876 being a close fourth—we all want to know what exactly these cannabis officers will be allowed to do regarding enforcement); these bills seek to change the face of the MMJ and recreational industries.

HB 1789 was sponsored by Representative Hurst, the King County legislator who originally sought to open I-502 for significant tweaking. Should HB 1789 pass, medical cannabis dispensaries can expect to pay a 25% excise tax on all sales of cannabis, in addition to the 9.5% sales tax that’s currently mandated by the Department of Revenue. And while HB 1789 finally presents the public with a definition of a dispensary, there are no provisions in that bill that would give arrest protection to dispensary owners or their patron patients.

SB 5528, a bill sponsored by Senator Jeanne Kohl-Welles, sticks with Washington’s current collective garden model, but also gives patients immunity from arrest and prosecution and makes clear that delivery to and from collective gardens would be lawful. However, when reading between the lines, it appears that SB 5528, if successful, would allow the state to eventually develop a state patient registry through the Liquor Control Board (LCB) which, according to the bill, would be tasked with studying the feasibility of issuing such cards before implementation.

SB 5029 could be lucrative for MMJ and I-502 cannabis businesses. Access to banking has been nothing short of a total pain for the cannabis industry as a whole. Without access to banking, in addition to other cumbersome issues, it is nearly impossible to run payroll or pay your taxes when necessary. As a result, SB 5029 could be the saving grace of both the MMJ and I-502 industries. While the bill doesn’t directly relate to cannabis, it is quite obvious that a state-backed bank, with the right charters and insurance, could do business with the cannabis industry with less fear of Federal government intervention.

Regardless of which bill you’ve got your eye on, if you’re in support or opposition, be sure to call your legislative representative to give them your two cents. In the meantime, we’ll be sure to let you know how these bills fare as they bounce through a very divided state legislature.

The people of Washington spoke in November; they wanted cannabis to be treated like alcohol, regulated, and taxed accordingly under Initiative 502 (I-502). Why then are three state representatives laying the groundwork to silence Washington voters by encouraging a slowdown of I-502’s implementation?

On January 9, 2013, three House democrats from King County (Chris Hurst of Enumclaw, whose panel oversees cannabis, Ross Hunter of Medina, the lead budget writer, and Reuven Carlyle of Seattle, who leads on taxes) wrote to Washington’s Liquor Control Board (LCB) that the LCB’s timeline for I-502 was too “aggressive,” and that the initiative should be opened up by the Legislature for some significant tweaking.

Specifically, Rep. Hunter was quoted saying that “[t]here is no rush” to issue grower licenses by May 2013. Mr. Hunter needs to realize that if the Legislature putters around in Olympia and delays implementation, contrary to the will of Washington voters, the black market will continue running rampant under the new law, flooding Washington with illegal product, taking advantage of the “less-than-an-ounce, no prosecution” rule. To those in the cannabis industry who want to see I-502 succeed, there is a major sense of urgency to implement the initiative to defeat their criminal competition and to promote a safe and secure industry.

Rep. Hunter continued to say that he  “ … [doesn’t] have a problem with legalizing [cannabis]. What [he does have] a problem with is the [LCB] hiring a whole bunch of people [the State doesn’t] have the budget for.” While this may sound reasonable, the best way to recoup costs of implementation is by doing it quickly, not delaying it. There is no way the State of Washington can implement I-502 without significant assistance, which ultimately requires a robust budget, a budget that will inevitably be stimulated and supplemented by future sales of cannabis that these three representatives are apparently trying to delay.

For his part, Rep. Hurst, a former police officer who was anti-I-502, was quoted by the Seattle Times as saying that there are “serious problems” with the initiative. And he wasn’t referring to the controversial green DUI provision or the insane tax rates. Instead, Hurst thinks that issuing licenses at $1,000 a pop is way too low and that a lottery or auction licensing system would be more appropriate anyway because, “[i]f we’re really going to have a free market, we should consider what the market will bear.”

What it looks like under Hurst’s regime is that anyone should be able to grow and that every applicant should pay an arm and a leg to do so. With the state looking to net billions of dollars from cannabis sales in the next five years, it sounds like a recipe for disaster (and wasted tax payer dollars) if any and every applicant with money to burn and no growing experience wins a $20,000 license to grow. Production is difficult; it requires experience and expertise. If Washington licenses producers who are unable to yield enough adequate product to meet demand, the black market will continue to thrive, contrary to the core goal of I-502.

Worse still is that Rep. Hurst also wants to fundamentally change the new law. Despite the red-tape hell that the medical cannabis industry has undergone due to the fact that cities have way too much power over its fate, Rep. Hurst seeks to give municipalities more control under I-502. Municipalities, other than Seattle, have shown with medical cannabis that they do not have the will to implement reasonable business regulations. If Olympia gives them the chance, certain cities will continue to bury their heads in the sand thereby defeating implementation of I-502 in their own right. It is imperative that all regulations and license location mandates come from the state so that municipalities cannot block implementation.

Rep. Hurst also suggested holding off on fully implementing the new law until the Obama Administration indicates how it will respond to I-502, which plays directly into the hands of frightened politicians and conservative attorneys at the Justice Department. I-502 had a number of goals, one of which was to push the federal government to make meaningful changes in federal law. By waiting for federal approval, Rep. Hurst is asking the Legislature and the LCB to let the initiative fail.

Despite all of the foregoing, Washington voters can rest easy for now. Neither Rep. Hurst nor Rep. Hunter will be able to affect I-502 or its implementation schedule unless they can obtain a positive vote to open I-502 from two-thirds of the Legislature — no small task.