On Friday, Governor Jay Inslee signed Senate Bill 5052, reshaping Washington’s medical marijuana law and largely merging commercial medical marijuana production and sale into the regulated I-502 recreational system. This law will have a significant impact on medical marijuana providers and patients. In this brief update, however, I will highlight some of the changes that will impact current participants in the recreational marijuana market or those who wish to join the merged recreational/medical system.
Retailers and Medical Endorsements
Under the new law, medical marijuana will be sold by licensed retailers who obtain a medical marijuana endorsement from the renamed Washington State Liquor and Cannabis Board (mercifully preserving the Board’s useful acronym). Any retailer who acquires an endorsement must carry products that are identified by the Department of Health as beneficial to medical marijuana patients and comply with what will likely be a host of additional regulations adopted by the Department and the WSLCB.
By July 1, 2016, the law will bring to an end unregulated collective gardens. Although individual and collective growing by no more than four medical marijuana patients (or designated providers) for their own use will remain lawful (subject to WSLCB regulation), the retail sale of recreational and medical marijuana will be limited to licensed stores with medical endorsements. Current recreational retailers will need to assess the pros and cons of serving the medical marijuana market and begin to take steps to prepare for applying for a medical marijuana endorsement.
New Retail Licenses
Under regulations to be adopted, the WSLCB will reopen the licensing process for retail stores and issue new recreational licenses to meet the needs of the medical marijuana market. The law directs the WSLCB to increase the maximum number of retail outlets authorized to operate in each county to accommodate the needs of medical patients. Unlike the prior I-502 lottery, however, this round of licensing will be merit-based and intended to identify retailers who have a demonstrated history of legal compliance, qualifications and experience in the marijuana industry, and familiarity with the needs of medical marijuana patients. The specific merit factors, timing, and licensing process will be determined by WSLCB regulation and interested applicants must take measures to stay abreast of this process and react quickly.
The WSLCB will give first priority to applicants who applied for a recreational retail license in the I-502 lottery (prior to July 1, 2014), who have operated or been employed by a medical marijuana collective before January 1, 2013, who have maintained appropriate business licenses, and who have a demonstrated history of paying applicable state taxes and fees. Second priority will be given to applicants who have operated or been employed by a medical marijuana collective before January 1, 2013, maintained business licenses, and paid state taxes and fees, but who did not previously apply for an I-502 license. This priority structure presents an opportunity for applicants who were unsuccessful in the I-502 licensing lottery, but have a tax and business licensing compliant history in the medical marijuana industry and are willing to incorporate medical marijuana into their retail business model.
Accordingly, participants in the medical marijuana market who did not maintain a business license or pay state taxes and fees may face a challenge in entering the new medical marijuana market structure and should take steps now to ensure compliance.
Producers and Processors
The law directs the WSLCB to reconsider the size of the total production canopy to address the need for production of medical marijuana within the regulated system. In addition, existing licensed producers may designate production space for the production of plants determined by the Department of Health to be appropriate for medical use. The LCB is directed to increase the production space allotted to those producers. If current producers do not claim the total increased production canopy, the WSLCB is empowered to reopen licensing for new producers who commit to grow plants destined for medical-endorsed retailers.
Regulations
One of the chief purposes of SB 5052 is to bring medical marijuana under the regulations already adopted by the WSLCB for the I-502 recreational system, including regulations requiring seed to sale tracking, testing and product safety, product packaging, retail store locations, and more. In general, retailers selling medical marijuana under a medical endorsement will need to comply with these WSLCB rules, and be prepared to address the rapid regulatory changes that have occurred in the past year and will likely continue to occur. In addition, the new law will establish additional areas of regulation that have not previously existed in the recreational system or that are specific to medical marijuana. For example, the law authorizes regulations to implement a new medical authorization database and define retailers’ responsibilities for inputting information and issuing recognition cards to patients. In addition, the Department of Health will adopt regulations addressing beneficial medical marijuana products, safe handling requirements, a new “medical marijuana consultant certificate,” and requirements for employees of medical-endorsed retailers. Finally, the law authorizes the WSLCB to conduct controlled purchase programs to enforce the restrictions on sales to minors and authorizes licensed retailers to conduct their own in-house controlled purchase programs to monitor compliance by employees.
We’d like to thank everyone who attended our seminar, “Moving Forward Under Measure 91,” last Friday, in Portland! It was a great event, and we were even featured as part of a KGW-TV news segment.
As promised, we’ve included links to presentations by GSB attorneys, the Oregon Liquor Control Commission, League of Oregon Cities and Association of Oregon Counties. Beginning next week we will begin our blog series addressing questions that we may not have been able to get to during the Q & A. Make sure to keep checking back here, or subscribe to our blog for updates!
OVERVIEW OF MARIJUANA BUSINESS PLANNING
- Andy Aley, Garvey Schubert Barer
- Claire Hawkins, Garvey Schubert Barer
- Jared Van Kirk, Garvey Schubert Barer
- Hal Snow, Garvey Schubert Barer
- Sean O’Day, General Counsel, League of Oregon Cities
- Rob Bovett, Legal Counsel, Association of Oregon Counties
- William Kabeiseman, Garvey Schubert Barer
OREGON LIQUOR CONTROL COMMISSION
- Tom Towslee, Acting Communication Director, Marijuana Programs, Oregon Liquor Control Commission
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Foster Garvey’s Cannabis practice group comprises a premier legal counsel team who provides a full range of legal services such as regulatory compliance, marijuana licensing, business finance, contracts, labor and employment, health care, real estate, intellectual property, litigation and dispute resolution, technology and tax. Our team possesses deep and diverse industry experience and has counseled clients across virtually all industry sectors. We understand the inherent challenges that licensed marijuana and ancillary businesses in Washington state, Oregon and Alaska are burdened with in this highly regulated industry as they deal with onerous state and local regulations as well as uncertainty resulting from federal law.
We are committed to helping our clients achieve their business goals while navigating the intricacies in this rapidly changing area of law. We prize innovation and entrepreneurship, and closely monitoring industry trends.
