Tribal CannabisOver the past couple of years, we have written about tribal cannabis and the efforts by various tribes in Oregon, Washington and elsewhere to roll out marijuana programs. Last week, at the Cannabis Law & Policy course I teach, we had the great pleasure of hosting Pi-Ta Pitt from the Confederated Tribes of Warm Springs here in Oregon. Mr. Pitt is the tribe’s Cannabis Program Coordinator, and he offered some valuable insights for tribes rolling out cannabis programs. Based on that discussion, here are some key takeaways for tribes.

  1. The Wilkinson Memo is still in effect, and confusing as ever.

Way back in October of 2014, the federal Department of Justice issued its “Policy Statement Regarding Marijuana Issues in Indian Policy.” Like the Cole Memo before it, the Wilkinson memo provides that eight enumerated federal priorities “will guide United States Attorneys’ marijuana enforcement efforts in Indian County,” including where “sovereign Indian Nations seek to legalize the cultivation or use of marijuana in Indian Country.” It all comes back to prosecutorial discretion, and the current administration has yet to comment on the Wilkinson Memo specifically.

In the past few years, federal attorneys have watched warily as Warm Springs and other tribes have explored the cannabis space. While these attorneys have seemed tolerant, to an extent, of the tribal initiatives, the take on cannabis events on tribal lands seems to have touched a federal nerve. Because events are disfavored, tribes looking to legalize cannabis production and sale may wish to steer the focus away from festivities.

  1. Tribes subject to Public Law 280 have a tougher go.

Public Law 280 is a federal statute allowing states to “assume jurisdiction over reservation Indians.” The Act mandated a transfer of federal law enforcement authority within tribal nations to state governments in six states: California, Minnesota (except the Red Lake Nation), Nebraska, Oregon, except the Warm Springs Reservation), Wisconsin (except the Menominee Indian Reservation), and, upon its statehood, Alaska. Other states were allowed to elect similar transfers of power if the affected Indian tribes consented. Since 1953, Nevada, South Dakota, Washington, Florida, Idaho, Montana, North Dakota, Arizona, Iowa and Utah all have assumed some jurisdiction over crimes committed by tribal members on tribal lands.

Tribes not subject to Public Law 280 don’t have to worry about states attempting to shutter their cannabis programs. Although it may behoove those tribes to have good relationships with their neighboring states, local enforcement is not a possibility – even if the adjacent states are anti-cannabis. Tribes subject to Public Law 280, however, may face immediate local barriers, in the form of law enforcement.

  1. Conversations are key.

Even where Public Law 280 is not at play, it is critical for tribes to dialogue with the states, along with federal officials. The Warm Springs Tribe and the Suquamish Tribe, for example, each have entered into an inter-governmental compact with Washington and Oregon, respectively, regarding their cannabis efforts. This is critical for any distribution of pot off of the reservation, which is where the tribes stand to reap significant economic benefit, but also where states regulate cannabis commerce extensively.

Federal conversations may be even more important. Most tribes already are very familiar with local U.S. attorneys, but conversations around the topic of legalizing cannabis are unique. Any tribe considering a cannabis program would be wise to dialogue with the relevant U.S. attorneys, and to get a read on how that office may respond. To this point, U.S. attorneys may view a tribal program as more “legitimate” if the program is borne of a referendum taken within the tribe itself. And that’s yet another, local conversation.

  1. This could go any number of ways.

Twists and turns are inevitable during the design and implementation of a sovereign’s cannabis program. It happens with states; it happens with tribes. Like states, tribes need to maintain flexibility and build coalitions as they attempt to launch a pot venture. Tribes also need to be realistic about timelines and the roles of current collaborators. For example, what will the tribe’s current bank or credit union think of the effort? What about its other stakeholders?

In all, cannabis can be incredibly attractive to tribes as a revenue source and job creator – especially to those tribes on resource-poor land, and to tribes far from interstate highway corridors, which are unable to contemplate casinos or tourism. In all, cannabis may present a unique opportunity for certain tribes, given the right approach.

Cannabis usageTwo years ago we did a post, Top Ten Dubious Claims About Marijuana, listing “legalization will lead to more marijuana in the hands of children and unfettered access for all” as the first dubious claim. A new survey from the Washington Department of Health shows we were right to doubt the legitimacy of that claim as teen marijuana use has not increased after legalization.

The survey collected data from roughly 230,000 Washington students and showed 26% of 12th graders, 17% of 10th graders, and 6% of 8th graders reported using marijuana in the last 30 days. The graph below from Vox shows that marijuana use among Washington State teens has not increased since cannabis became legal in 2012.

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The teen numbers in Washington are consistent with what has happened in Colorado as well, where a study showed teen use in that state remained steady after Colorado legalized marijuana, also in 2012.

Prohibitionists love claiming that legalizing cannabis will increase adolescent use, but really, why should it? States that have legalized recreational marijuana track the plant from seed to sale. Sales require the purchaser show ID and a retail store that sells to minors can lose its license. A well-functioning legal market should and does reduce unlawful diversions to kids. We predict that as legalization spreads, it will become increasingly difficult for adolescents to get access to cannabis. We also predict that as cannabis becomes normalized, its “coolness” factor will decrease and that too will lead to a decline in teen usage.

When Washington legalization advocates argued for Initiative 502 to legalize marijuana they touted a regulatory regime that would lead to responsible cannabis use. This study on teen use supports the notion that Washington is achieving its goal of providing a forum where adults can enjoy cannabis recreationally without giving increased access to teens. A well-regulated cannabis market does not harm society the way legalization opponents would have you believe. If you care about facts and if you want your state’s policies to be based on facts and not politics or myth, you should take heart from the above statistics.

 

 

Washington Cannabis LawyerThe Washington State Liquor and Cannabis Board (LCB) enforces a wide range of rules and laws on cannabis. Because of this, our cannabis attorneys constantly stress to our clients the need for them to set up and rigorously maintain comprehensive regulatory compliance protocols to avoid violations of LCB rules and regulations and to mitigate penalties should such violations occur.

When the LCB believes a licensed cannabis business has committed a rule violation, it will issue the licensee an Administrative Violation Notice (AVN), describing the alleged violation and a recommended penalty. The LCB has broad discretion in assessing penalties for cannabis rule violations, based on Washington Administrative Code instructions that it consider mitigating and aggravating factors in making that penalty assessment. Penalties generally increase if the cannabis licensee has had repeat offenses within a two-year window.

The Washington Administrative Code separates cannabis violations into five categories:

  • Group One—Public safety violations. These violations are considered the most serious and they have the harshest penalties. For example, a cannabis licensee caught buying or selling marijuana to or from an unauthorized source faces cancellation of its license with even a first offense.
  • Group Two—Regulatory violations. These violations include failing to keep proper records, failing to submit required monthly reports, and improper advertising.
  • Group Three—License violations. These violations include failing to abide by licensing requirements and license classifications. Some Group Three violations can result in cancellation of the cannabis license even on the first offense. For example, a licensee’s failure to disclose everyone who owns, operates, or loans money to a licensed cannabis business is a violation of Washington’s true party of interest rules and it can lead to a cancellation of the cannabis license. Other Group Three violations can result in monetary penalties and/or a suspension of license.
  • Group Four—Nonretail violations. These violations involve the manufacture, supply, processing, and/or distribution of marijuana by nonretail licensees and prohibited practices between nonretail licensees and retail licensees. Generally, a first offense of a Group Four violation will result in a fine, but the LCB may cancel a license after the third Group Four offense.
  • Group Five—Violations involving the transportation freight of marijuana. These violations can result in cancellation of a license for a first offense if marijuana is transported from or diverted to an unauthorized source. This includes marijuana transported outside the state of Washington.

The LCB generally doesn’t temporarily suspend producer or processor licenses; it instead employs monetary fines, destruction of inventory, and/or license cancellations to penalize non-retail cannabis licensees. On the other hand, Cannabis retail license holders generally see temporary license suspensions, monetary fines, or license cancellation.

A cannabis licensee has 20 days after receiving a Violation Notice to accept the penalty, request a settlement conference, or request an administrative hearing before an administrative law judge. At these settlement conferences, the cannabis licensee and the LCB discuss the circumstances surrounding the LCB allegations, the recommended penalty, and any aggravating or mitigating factors. You are allowed to bring an attorney to these settlement conferences and you should. The hearing officer’s settlement authority is often limited, but the primary goal of the hearing is to explain why the incident occurred, to identify what failures there were in the licensee’s internal compliance program, and for the licensee to detail a plan to prevent future violations. If a licensee successfully explains all of that, the penalty is generally mitigated. In mitigation, fines and suspension periods are generally cut by 40%-50%.

The administrative hearings on LCB rule violations are similar to court proceedings but a bit less formal. For example, these proceedings do not use the strict evidentiary rules of courts. At these hearings, the cannabis licensee and the LCB may question witnesses and submit and challenge documents regarding the alleged violation. The administrative law judge typically reviews the circumstances surrounding the alleged violation, including any mitigating and aggravating factors and determines guilt or innocence and then hands down a penalty pursuant to the penalty guidelines in the Washington Administrative Code. If the cannabis licensee is not satisfied with any aspect of the administrative judges’ decision, it can appeal to the LCB to have the decision overturned.

Bottom Line: Cannabis licensees should have company-wide policies and procedures in place to avoid rule violations and as a mitigation factor should any rule violation occur. They should also know their various options for dealing with any alleged violations.

Cannabis LawA litany of comments made by White House Press Secretary Sean Spicer, Attorney General Jeff Sessions, and many other Tump administration officials have sent tremors through the cannabis industry in the weeks since Trump’s January inauguration.

Most alarming to many cannabis industry stakeholders was the administration’s uncertain position on state-legal cannabis programs. True to form, Press Secretary Sean Spicer predicted, “greater enforcement” of the Controlled Substances Act in recreational states under the Trump administration during a press conference two weeks ago. More recently, Attorney General Jeff Sessions reportedly reassured some GOP senators that he will not be moving away from Obama-era deference to state-legal cannabis programs. To many invested in the marijuana industry, however, Sessions’ statement is cold comfort coming from an Attorney General who harbors an irrational hatred of cannabis and intends to enforce existing federal drug laws to the letter.

Nevertheless, a glimmer of silver lining shines from the House of Representatives hopper for Democrats in the form of HR 1227 or the Ending Federal Marijuana Prohibition Act of 2017. The bill, introduced by Congressman Tom Garrett (R-VA), is co-sponsored by congressional Democrats Tulsi Gabbard of Hawaii and Peter Welch of Vermont. This law would de-schedule cannabis from the Controlled Substances Act and allow for states to self-regulate their own cannabis programs.

If passed, the Act would be an unprecedented win for the cannabis industry as a whole and fundamentally change the landscape of legal cannabis in the United States. Here are the details:

What would HR 1227 do?  Essentially, the Act would remove cannabis from Schedule I of the Controlled Substances Act (CSA). This is distinct from hints from the Drug Enforcement Administration in 2015 that it might consider re-scheduling cannabis from Schedule I to Schedule II of the CSA. Though de-scheduling cannabis would allow state marijuana programs to carry on essentially unfettered, re-scheduling could introduce new obstacles akin to those that other fledgling and experimental drugs must overcome.

What wouldn’t HR 1227 do? HR 1227 will not give blanket permission for transferring cannabis across state lines; states would be free to prohibit shipments of cannabis to and from their own jurisdictions. The bill also would not override state-level regulations that set standards for licensure, labeling, and purity. The status quo of state cannabis laws would therefore persist, but against a far less draconian backdrop of federal criminal law.

What are the bill’s prospects in 2017? Not great, unfortunately, but it is not all its fault. Congress has a lot on its plate this session – including still-pending confirmations of several presidential appointees – and cannabis reform is just not a high priority for lawmakers on either side of the aisle. Prospects for meaningful cannabis reforms on the federal level are dim under a unified Republican government absent an ideological shift. At least in the short term.

Why does this sound so familiar? The bill is identical to the Ending Federal Marijuana Prohibition Act of 2015 introduced by Senator Bernie Sanders (I-VA). The 2015 bill was a hit among Sanders’ core supporters at the time but it failed to gain any significant traction in Congress.

 

 

washington state cannabis law marijuana lawOn Thursday, President Trump’s Press Secretary Sean Spicer predicted “increased enforcement” against recreational cannabis. By Friday, Washington State Attorney General Bob Ferguson was promising Washington State would “resist any efforts by the Trump administration to undermine the will of the voters in Washington state.”

Washington State AG Ferguson’s office also tweeted  the following:

 I was deeply disappointed to hear the White House Press Secretary’s comment today regarding marijuana legalization by states like Washington.

Last week [Washington State] Governor Inslee joined me in sending a letter to Attorney General Sessions, asking for a meeting on this issue. I look forward to sharing how our state’s approach is working.

I will also be very clear with AG Sessions that I will defend the will of Washington voters. My office will use every tool at our disposal to ensure that the federal government does not undermine Washington’s successful, unified system for recreational and medical marijuana.

The Ferguson/Inslee letter describes how legalization in Washington State has allowed local law enforcement to use its limited resources to combat other, more serious crimes, and how legal marijuana has generated significant tax revenue for the state. Ferguson and Inslee also requested Sessions continue to uphold the the Cole Memo.

Sessions has not yet indicated how he will treat legal cannabis nor what his position will be on the Cole Memo, which essentially says the federal government will stay away from robustly regulated state-legal cannabis. Washington State has already scored a legal victory by blocking the President’s travel ban, so few view AG Ferguson’s stated intention to fight for cannabis as an idle threat.

If the Feds do seek to shut down Washington State’s highly successful recreational cannabis industry, we expect the state would argue that federal law on cannabis cannot preempt state law. Washington State would likely argue there is no conflict between Washington’s recreational laws and the federal Controlled Substances Act because the two can stand together. Washington’s recreational marijuana laws support the intent of the federal Controlled Substances Act, which is to sufficiently control and oversee scheduled narcotics.

Though Washington State will likely concede that the federal government has the power to enforce its own marijuana laws, it will likely argue that the Tenth Amendment of the Constitution prohibits the federal government from forcing Washington State to use any of its own resources to carry this out. Since Jeff Sessions concedes that marijuana enforcement is a question of “federal resources,” the more the states with legal cannabis force the federal Department of Justice to expend federal funds and resources to eradicate cannabis, the less likely it is to occur. If the federal government is serious about going after recreational marijuana in states like Washington, we should expect serious and sustained resistance from states whose citizens voted legal marijuana.

 

Marijuana Real EstateTomorrow, I will co-present a national continuing legal education (“CLE”) seminar for the American Law Institute, titled “Cannabis and Commercial Real Estate.” I will present this 90-minute seminar and webcast with Daniel Dersham, a talented real estate attorney with the San Francisco law firm Wiley & Bentaleb LLP. The seminar is designed for lawyers around the country who wish to assist clients in buying, selling and leasing real estate in the cannabis industry. It is also a great opportunity for non-lawyers to gain insight on how cannabis properties are rented, bought and sold, and to understand how attorneys approach these unique transactions.

Over the past few years, our Oregon, Washington and California offices have advised on hundreds of real estate transactions related to state-legal cannabis. In the Oregon office alone, we are continuously working on these deals, which may range from the negotiation of a 1,500 square foot lease for a dispensary, to the purchase of a 150+ acre property for large-scale agriculture across multiple licenses. Each deal is a snowflake, and each brings unique opportunities and challenges.

Because we are always doing real estate deals, we tend to write about them often. For a recent sampling of work related to this field, including topics that will be covered at tomorrow’s CLE, please see the following recent Canna Law Blog articles:

Like many aspects of the cannabis industry, the central issue that makes real property transactions challenging, unique, and even sort of fun (at least for us cannabis business lawyers), is federal illegality. That issue ripples through pretty much every cannabis real estate deal in myriad ways, and a skilled practitioner with knowledge of the following is required: (1) the dynamic interplay of state and federal law; (2) the intricacies of state and local regulatory programs for cannabis– including zoning and land use laws; and (3) industry standards on achievable deal points for a lease or sale transaction.

Over the next year or two, existing state marijuana markets will continue to mature and new markets will come online. We expect to see a continued emphasis on real estate deals during this period. Buyers, sellers, landlords, tenants and service providers who understand the way this game is played will have a considerable advantage. And for many in the cannabis industry, negotiating a real estate transaction will be the largest decision of all.

I hope that you can join us.

Washington State cannabis delivery serviicesAre cannabis delivery services legal in Washington State? 

Strong demand for home-delivery cannabis services in Washington – and particularly Seattle – is apparent, as demonstrated by the numerous delivery services operating in plain sight, as revealed by a simple Google or Yelp search. Yet, such operations remain illegal following the passage and implementation of I-502. In 2016, Seattle proposed a law to permit a pilot project for legal delivery in Seattle (which failed in the state legislature). This year, Seattle officials are pushing for similar legislation, with certain modifications, that they hope will open the door to cannabis delivery throughout the state.

What’s the status quo in Washington State?

Cannabis delivery services are as old as old-school weed dealing itself. The common trope is of the marijuana dealer who delivers late (and stays past their welcome) – and only after multiple calls or texts. Today’s pot delivery services, particularly in states with legal medical or adult-use cannabis, are exponentially more professional operations – yet, in large part, they remain illegal under both state and federal law. Such is the case in Washington State.

What happened with the 2016 proposal?

Last January Seattle city officials supported Washington State House Bill 2368, which would have authorized a pilot plan for home cannabis delivery in Washington in cities with 650,000 or more people – effectively just Seattle.

HB 2368 was seen by as “Seattle-centric” and lawmakers outside Seattle and greater King County did not vote for the bill because it would not directly benefit their constituents. Also, Washington can be a deceptively conservative in general and in terms of cannabis, especially on outside its urban centers and especially on the East side of the mountains. Ultimately, HB 2368 did not become law.

How does the new proposal differ?

MyNorthwest.com reports that Seattle City Attorney Pete Holmes intends to broaden support for the 2017 bill by allowing home cannabis delivery statewide. Such marijuana delivery services would still be subject to county and municipal regulations and prohibitions.

Will it pass?

The bill’s ultimate fate is unclear. City Attorney Pete Holmes said in January that the bill was in the early stages of finding a bill number and sponsor, though he was optimistic going forward. Ultimately, only time will tell if this or a different bill authorizing cannabis delivery eventually becomes law in Washington State. Though it is far from certain, I think pot delivery services will within the next few years become legal in Washington and I say this because the longer Washington legalization goes on without the sky falling down (and I do not foresee the sky falling down), the more Washingtonians will come to realize it is no big deal and the less they will care about restricting it by doing things like forbidding cannabis deliveries.

Why is this important for the future of cannabis reform in Washington State?

Other jurisdictions with legal medical or adult-use cannabis have experimented with home delivery, and “gray market” home delivery operations are thriving in Washington and other state-legal cannabis states since before legalization. This despite many arrests in Seattle.

The demand for cannabis delivery ensures and proves its durability as a market force. Allowing illegal delivery operations to prosper erodes the legitimacy of legal cannabis markets, and undercuts its economic rationale. Our cannabis clients resent having to pay big taxes and be subject to massive regulations while at having to compete with illegal operations that avoid both of those things. The solution is to permit legal home delivery for medical and/or recreational users and to license and treat those cannabis delivery services  as any other cannabis business.

Why is this important to medical patients and adult-use cannabis consumers?

The ability to legally provide home cannabis delivery services is particularly important to medical marijuana patients with limited mobility or other disabilities that make it impossible or unduly burdensome for them to personally go to a dispensary to obtain cannabis. Also, even adult-use recreational patients can benefit from the convenience and added value of a cannabis delivery service. Just look at Amazon Prime.

For its part, earlier this month a Seattle Times editorial endorsed legalizing cannabis deliveries.

 

Cannabis Business LawyersOur cannabis business lawyers are always getting pitched on “creative solutions” to the cannabis industry’s banking problem. Because marijuana is still federally illegal, most banks will not provide financial services to marijuana businesses, even though FinCEN issued guidelines to allow financial institutions to provide bank accounts to the state-legal pot businesses. Many tout Bitcoin as the solution.

Bitcoin is viewed as the world’s first completely decentralized currency. Unlike the Dollar, the Euro, the Yuan, etc., no central government manages or backs Bitcoin. It is also called a “cryptocurrency” — a digital currency that uses encrypted services to generate units of the currency and to transfer funds.  You can read primers on it here and here. Using a Bitcoin wallet enables customers and businesses to engage in transactions without using paper currency and without going through an intermediary institution like a bank. Its chief appeal to the marijuana industry is that allows for currency transfers with little to no need for a bank. There are though significant issues involved with using Bitcoin in the marijuana industry and law enforcement associates Bitcoin with the illegal narcotics trade (see the Silk Road).

At the beginning of January, Washington State Senator Ann Rivers (who was instrumental in securing passage of SB 5052, which essentially wound down Washington’s existing medical marijuana cooperative system) proposed a bill to ban Bitcoin in Washington State’s marijuana marketplace. Senator Rivers says that her proposed bill to ban Bitcoin was brought to her by “an organization” looking to preserve “the transparency that we have in our legalized marijuana system in our state.” The eight-page SB 5264 adds to the definitions section of RCW 69.50.101 (Washington’s Controlled Substances Act) the term “virtual currency,” and then proceeds to ban it for marijuana sales. Under the bill, “virtual currency” would be defined as follows:

a digital representation of value used as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status as recognized by the United States government. “Virtual currency” does not include the software or protocols governing the transfer of the digital representation of value or other uses of virtual distributed ledger systems to verify ownership or authenticity in a digital capacity when the virtual currency is not used as a medium of exchange.

The bill then states that “[a] marijuana producer, marijuana processor, or retail outlet must not pay with or accept virtual currency for the purchase or sale of marijuana or any marijuana product.”

The Bitcoin ban bill was debated at length in Olympia and Senator Rivers’ cited to the Cole Memo prohibiting the “shrouding” of anyone who participates in Washington’s marijuana industry as its justification. Senator Rivers contends that BitCoin can’t meet the 2014 FinCEN transparency guidelines. Tom Parker and Kenneth Berke of PayQwick also testified that Bitcoin does not satisfy FinCEN transparency guidelines and allowing it for Washington State marijuana businesses will invite federal enforcement and thereby harm the cannabis industry as a whole. On the other side of the argument, Ryan Hamlin and Jon Baugher of POSaBIT testified that BitCoin is perfectly traceable, auditable, verifiable, and transparent, and that the state needs to better understand BitCoin transactions before it bans its use in the marijuana industry. James Paribello, legislative liaison for the Washington State Liquor and Cannabis Board, testified that the Board essentially has no opinion on the use of BitCoin or its proposed ban, so long as the Department of Financial Institutions allows it, which it currently does.

Given the uncertainty of the state-legal marijuana industry under Trump and Sessions and the precarious staying power of the Cole Memo and the FinCEN guidelines, Bitcoin may just be too risky for Washington State’s marijuana industry. But if the state can get educated about and comfortable with BitCoin, virtual currency may be here to stay in the Evergreen State’s marijuana industry.

Stay tuned.

Washington state cannabis licenseAdvocates for cannabis reform often point to favorable studies documenting the positive medicinal and wellness effects of marijuana to debunk federal law scheduling of cannabis as a substance on par with heroin. Opponents of cannabis reform invoke statistics that purport to show a relationship between cannabis and crime and violence. What both sides must agree upon, however, is the need for new, in-depth, and nuanced research of legal cannabis’ effect on society. At least if they belive in scientific research over anectdote.

Washington State is  moving in this direction with its cannabis research licenses. Here is what you need to know about these cannabis research licenses.

What is a Washington cannabis research license? Washington’s cannabis research license has been set up to facilitate further study of cannabis’ scientific, medical, and industrial properties and applications. According to Washington statute RCW 69.50.372, marijuana research license holders  may “produce, process, and possess marijuana for … limited research purposes.” The law restricts the scope of permitted research to the generously broad categories of: tests of chemical potency and composition; clinical investigation of cannabis-derived drugs; tests regarding the efficacy and safety of cannabis as a medical treatment; and genomic or agricultural research.

Along with a whole host of other factors, these new cannabis research licenses will help solidify Washington state – more specifically the Seattle area – as a hotbed for cannabis research. Existing Seattle cannabis and biotech and technology firms (almost all of which are quite open to cannabis), along with the city’s vibrant vibrant start-up scene should combine to accelerate worthy cannabis research for a wide range of applications.

What is the latest regarding Washington cannabis research licenses? The Washington state legislature passed a law authorizing licenses for researching cannabis’ medical properties, chemical composition, and agricultural potential last year. Following a rule making period, the Washington State Liquor and Cannabis Board has indicated it will begin accepting applications March 1, 2017. However, absent swift action by the Washington state legislature, this date will probably get pushed back by a requirement in the research licensure law discussed below.

Why might there be a delay in implementing cannabis research in Washington? The law that created cannabis research licenses also mandates that applicants and their research projects be vetted and approved by third-party scientific reviewers. The reviewers are required to audit the research and its reports. This is a an understandable precaution given the state law’s conflict with federal law (which still pretty much makes cannabis illegal for any purpose), and a fair method for ensuring the licenses are being used for their intended purpose.

The problem is that Washington State has not yet approved any third-party scientific reviewers, and no such approvals appear to be forthcoming. Many expected Life Sciences Discovery Fund to serve as a scientific reviewer, but for what appears to be funding reasons, it has not stepped up. Nor unfortunately, have either the University of Washington or Washington State University or any of the other institutions of higher learning in the state. Until a third-party scientific reviewer is approved, applicants will be in limbo.

The new cannabis research law also requires the Washington State Liquor and Cannabis Board select a scientific reviewer to review the research project and determine the merit of its quality, design, and impact; the adequacy of its personnel, expertise, and other functional capacity; and whether the quantity of marijuana cultivated matches the needs of these objectives. No scientific reviewer, no cannabis research.

Why is this important? Lack of legal and high level cannabis research is a classic “chicken and egg” problem for cannabis legalization. Cannabis is illegal in large part because the powers that be claim it to have no legally recognized medicinal or therapeutic value. And yet — surprise, surprise, efforts to conduct high level research that might show the contrary gets suppressed by a lack of legal access to cannabis and by a reluctance by many to fund research that could be shut down as illegal. Something will have to give in order to overcome this impasse, and it is not sure when or how that might happen.

As cannabis lawyers, we find all of this extremely frustrating, as it not only means that those needing cannabis for medical reasons are cheated out of their medicine in states where cannabis is not legal even for medical treatments, but it also means that in cannabis legal states like Washington, far too many patients do not not get the ideal strain and quantities and ingestion method for their particular conditions because there is no high level research on these things. It also means that countries like Israel and Canada will continue to surpass the United States in cannabis research and technology.

Bottom Line: Do not expect your Washington State cannabis research license soon. And that is too bad.

Cannabis regulatory lawyersOur cannabis regulatory lawyers are in the midst of a few different administrative cases right now dealing with violations of marijuana regulations. In Washington State, the Liquor and Cannabis Board treats its regulatory mandates as “strict liability” rules. This means the onus is on the cannabis business to comply, and a business that violates a regulatory mandate is liable even if it did absolutely everything it could have done to prevent the violation. This sort of strict liability for violating cannabis-focused regulations is fairly common across the country and is just another example of how cannabis businesses even in cannabis-legal states are treated differently from other businesses.

The theory behind strict liability for regulatory violations is that businesses are best positioned to make sure violations do not occur. Businesses need to pony up as many resources as it takes to prevent violations. This strict liability is opposed to a negligence standard, where if the business is found to have acted with reasonable care to comply with the rules, it would not be found liable.

The problem with strict liability, however, is that it can be unfair to businesses that try to have reasonable compliance programs but still slip up. There is no way to prevent employees from flouting the rules from time to time. It happens at every regulated business throughout the country. Employees often see compliance measures as a hindrance to getting their jobs done, and they look for workarounds. But in a strict liability system, a business whose employee violates a compliance program is treated the same as a business that didn’t have any compliance program at all. There is a certain unfairness to that.

The goal of any regulatory agency should be for businesses to have maximum compliance, and the best way to do that is to encourage self-policing. This is why most federal agencies have dedicated programs for regulatory compliance, self-policing, and self-reporting, where penalties against businesses are greatly reduced or even waived if the business follows certain compliance steps.

Washington State voters mandated the State implement this sort of favoritism for liquor merchants “that try” when it passed Initiative 1183, privatizing liquor sales. Under that program, Washington liquor sellers that implement specific best practices to avoid selling liquor to minors will face reduced and deferred penalties if they accidentally make such a sale. Regulatory partnerships like this benefit businesses by giving them guidelines on how to operate and they also benefit the public as a whole as they will lead to fewer overall sales to minors because businesses are so incentivized to implement effective programs.

For marijuana in Washington, the best that cannabis businesses can rely on are that the regulations allow the Liquor and Cannabis Board to reduce penalties if a cannabis business with violations can demonstrate that its business policies and/or practices will reduce the risk of future violations. And though mitigation like this is helpful, it is not the same as a standardized compliance program responsible companies can join to get across the board penalty mitigation.

Marijuana businesses should band together to demand such a “voluntary” compliance program. As everyone knows, regulatory costs for cannabis businesses are high, and even the most compliant cannabis company will have employee slip-ups or regulatory misunderstandings from time to time. The competitive aspect is also key; so long as cannabis compliance program guidelines are not set across the board, businesses will try to comply with the rules at the lowest cost, to the detriment of the compliance programs. Setting up minimum compliance guidelines will allow participating cannabis businesses to know their competitors are either on the same playing field as they are, or that they are risking harsher penalties for not being part of the voluntary compliance program. It’s a win-win for compliant cannabis businesses and for the state. Yet no matter what sort of state-law program to which your cannabis business is subject, it pays to constantly self-audit your company to work towards full compliance. See Understanding and Managing Cannabis Legal Compliance and Cannabis Compliance Audits.

What are you seeing out there? What are your thoughts on all of this?