New Washington state cannabis regulations reflect concern about federal threat

By Bart Schaneman

Washington state’s updated marijuana rules serve notice that regulators are feeling pressure from a U.S. attorney general who opposes legalized cannabis.

The regulations guide the state’s cannabis businesses toward stricter compliance with the Cole Memo – the sector’s best protector against the federal government.

When Senate Bill 5131 took effect June 23, it created the most significant round of changes to Washington state’s marijuana laws since the original recreational cannabis regulations were enacted in 2013.

The new regulations apply a number of restrictions to the state’s market, though they also increase the number of retail outlets a license holder can hold from three to five.

Here are some other key points for marijuana business owners to consider:

  • Dispensaries are required to ensure advertising doesn’t appeal to children.
  • Firms can undertake trademark and licensing agreements and also protect trade secrets.
  • Businesses that are approved for a license but fail to open a store within two years may have to surrender those permits.
  • Dispensary or retail workers must be 21 or older.
  • Recreational home growing remains illegal, but the state will study the possibility.

Perhaps the regulations’ biggest impact, however, is the state’s attempt to protect its marijuana businesses.

“If you look at it in the broader context, what you’re seeing is further legislative cleanup that needs to be done,” said Oscar Velasco-Schmitz, co-founder of Dockside Cannabis, a cannabis retailer with shops in Seattle and Shoreline, “and an implicit reaction to the current federal administration.”

Aaron Pickus, a spokesman for the Washington Cannabusiness Association, didn’t want to overstate the regulators’ focus on protecting the state’s marijuana industry. But he conceded “there was certainly a change in concern about what the federal government may or may not do regarding the legal cannabis marketplace following the comments made by (the Trump administration).”

Advertising rules are key

Washington state’s regulators apparently had the Cole Memo in mind when they required cannabis retailers to tailor their advertising so it doesn’t appeal to children. Under the Cole Memo, keeping marijuana out of the hands of minors is one way a state can avoid the ire of the federal justice department under Attorney General Jeff Sessions.

“There’s a lot more to comply with now,” said Daniel Shortt, a Seattle-based cannabis attorney. “When you have an administration where the attorney general is pretty openly hostile to cannabis, but at the same time has not retracted the Cole Memo,” it follows that the state legislature would fashion regulations along those lines.

According to the regulations, “establishing limited restrictions on the advertising of marijuana and marijuana products is necessary to assist the state’s efforts to discourage and prevent underage consumption and the potential risks associated with underage consumption.”

To Shortt, that means “any outdoor advertisement now is really restricted to just being informational. It takes out the ability for any business to creatively advertise or advertise in an eye-catching way.”

Retailers aren’t allowed to place signage touting a marijuana business or product within 1,000 feet of a school, playground, recreation facility, child-care center, public park, library or any game arcade.

MJ businesses are also restricted in billboard advertising.

“The goal of creating a regulated market is a very good goal,” Velasco-Schmitz said. “The detriment in restriction of advertising is that you can’t convert the customer (into a marijuana consumer) – which is the ultimate goal.”

Russ Orsborn, a Washington state cannabis consultant, sees a contradiction in stores that his grandchildren walk past being allowed to advertise alcohol and tobacco, yet marijuana businesses can’t spread their message.

“There seem to be a lot of regulations specific to this industry to either hold it back or conserve an image that some people think is acceptable,” he said. “But at the same time, being a grandparent, I do understand. If there’s going to be a (cannabis) billboard, I hope it has some taste.”

Marijuana businesses are not permitted to advertise on cars, appeal to tourists or use mascots in their ads.

A more open market?

Shortt believes allowing license holders to increase their retail stores from three to five will result in more transactions, including mergers and successful retailers buying up businesses from owners seeking to exit the industry.

“If you take a successful cannabis business with means for growth, now they have a legal means to grow,” he added.

However, some observers think that stipulation might not have much impact because of branding.

A businessperson can have whole ownership of one organization, which then can have taken any branding approach it chooses, Velasco-Schmitz said. And that, he said, can result in a company having more than the maximum number of retail stores under one brand.

Orsborn finds the ownership limit unnecessary no matter the number allowed.

“If we’re going to look at our industry as a normal, accepted industry, what other industry is regulated in the sense that you can’t expand?” he asked. “I’m all for having the mom-and-pop stores everywhere. But at some point, people start to expand. How do you say who can and who can’t?”

Unfair deadline?

While Washington state hasn’t had the same headaches as neighboring Oregon when it comes to licensing delays, penalizing businesses for not opening within a two-year window has some insiders scratching their heads.

“I don’t see the point in that,” Velasco-Schmitz said. “These aren’t normal businesses. These businesses face zoning restrictions. They face real estate restrictions. They face capital access restrictions.”

Orsborn agreed, adding, “I’m not sure I would see any positive come from sitting on a license.”

No matter how one feels about the new rules, Velasco-Schmitz has a realistic overall takeaway:

“There’s good and bad in every legislation. If you don’t like it, wait until the next legislative cycle.”

Bart Schaneman can be reached at [email protected]

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 5 Comments

  1. John Dickinson June 29, 2017
  2. J. Bergeman June 29, 2017
  3. Kundun July 1, 2017
  4. Pam July 1, 2017
  5. Jim Boynton July 2, 2017

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