Washington, like Colorado, legalized recreational cannabis for adult use in 2013. It has now been more than six years since the first stores opened and the Washington State Liquor and Cannabis Board is working on dialing in the regulations known as “Cannabis 2.0.”
Unlike most other regulatory systems in the United States, Washington prohibits vertical integration. As a result, the products and branding are far more developed than other states and countries due to competition. The primary licenses, with applications accepted in 2013 for just 30 days, included an unlimited number of producer and processor licenses and 554 retail licenses, broken down by municipality and allotted by lottery. A producer license is required to cultivate cannabis. A processor license is required to package the plant material and create the breadth of products for sale. One can own a maximum of three producer and three processor licenses.
A retail license allows one to sell prepackaged products and at this time, an individual can hold a maximum of five retail licenses. In order to have an ownership interest in any Washington license, one must be a resident of Washington for at least six months prior to applying and then submit to a financial and criminal background check. After 2013, producer and processor license applications were never reopened. As a result, the cost to buy an existing license is now more than $100,000. Retail licenses, meanwhile, can cost more than $1 million in the city of Seattle. There are currently 1,410 total cannabis licenses that have been issued.
In 2019, the cannabis excise tax, a rate of 37% on the sale to the consumer, raised $390.4 million for the state, on total cannabis sales of more than $1 billion. The cannabis excise tax expenses are more than $172 million greater than the liquor sales in the state, which is remarkable considering the Washington liquor taxes are the highest in the country, at $32.52 per gallon.
The state Liquor and Cannabis Board is currently drafting rules to permit out-of-state investment, which will provide cannabis business with access to capital markets that are currently unavailable, retarding the growth and development of the industry that other, later-opening states have avoided. Currently, out-of-state parties can only loan funds to the licensee or take a position ancillary to the plant, such as a real estate or equipment lease.
The Legislature and the Liquor and Cannabis Board continue to tweak rules to improve one of the first legal cannabis industries in the world.
Neil Juneja | Gleam Law
Neil Juneja is the founder and managing partner of Gleam Law, a cannabis and hempNeil appeared in Newsweek, Time Magazine, and on several documentaries for his work in thel industry. He has been awarded numerous accolades including selection as one of the 40 under 40 most influential people in the cannabis industry, five SuperLawyer’s Rising Star awards, and the National Law Journal Cannabis Trailblazer award.