The Trouble with Washington

Clashes between lawmakers, licensees and regulators highlight disparities between Washington and Colorado markets

Washington state had every opportunity to be the national leader in cannabis, to create a blueprint for other states to follow and truly set the standard for consumer and public safety.

It had the potential to establish a competitive, but fair, business landscape and to allow the most ambitious and successful brands to secure the advantages of being early entrants in the legal, recreational marijuana industry, lighting the way for future regulatory models.

To put it bluntly, the state has failed to carry the torch.

Instead of being a leader, Washington has been a beacon of bureaucracy and over-regulation (and yet, on certain subjects, suspiciously lax on the regulations). Businesses have been plagued by a five-year litany of senseless legislation, unnecessary disruptions, inconsistent enforcement and baffling regulatory decisions.

I’ve been hearing business owners and managers complain about the Washington State Liquor and Cannabis Board since the day we started Marijuana Venture in 2014. All regulated industries complain about regulators and over-regulation. If you gave them the opportunity, Wall Street and Big Oil would say they’re being regulated to death, despite seemingly record-breaking profits year after year. In the early days of Washington’s legal industry, I typically found myself defending the Liquor and Cannabis Board (at that time known as the Liquor Control Board). For some people, it was easy to forget that Washington, in creating from scratch the framework for an adult-use cannabis industry, was doing something no other state had ever done before. There wasn’t a model to follow. There were sure to be bumps in the road, problems that had to be fixed on the fly.

Understandably, every applicant wanted to have their license immediately. Also understandably, the process went painfully slow, particularly for the first six months to a year. Keep in mind, the state expected about 2,200 applicants, according to a 2014 interview I did with Liquor and Cannabis Board director Rick Garza; “To our amazement, over 7,000 people applied,” he said. It was really a monumental undertaking and for the most part, I thought the regulators handled it well.

However, though the local industry has matured, the state clearly hasn’t caught up. And it needs to be held accountable for the myriad problems.

For example, the state’s seed-to-sale tracking system remains a train wreck. After a launch process that was fraught with delays, the state finally flipped the switch on the new traceability provider a little more than one year ago. The transition to the LEAF system was devastating to hundreds, if not thousands, of businesses. Months later, in the May 2018 issue of Marijuana Venture, I wrote about the wide range of programming bugs and customer-service problems, attributed to both the state and MJ Freeway, the company contracted to provide the traceability infrastructure, that continued to dog state-licensed businesses.

Today, it’s clear that many of those problems were never resolved. For the most part, the system “works,” but businesses complain about regular functionality glitches that range from minor annoyances to glaring holes in the system’s primary purpose — ensuring that legal cannabis isn’t sold on the illegal market. It begs the question: If the system hasn’t been fixed yet, will it ever?

Seed-to-sale tracking was supposed to be the centerpiece of Washington’s legalization infrastructure (and frankly, it has been a major component of every state legalization measure that has followed). This was supposed to be the security blanket to prevent state-legal cannabis from being diverted out of state and violating one of the eight priorities of the Cole Memo. Garza himself said as much in an interview Marijuana Venture published in 2017, calling the traceability program “the piece that helps us explain to the Feds that we have an eye on what’s moving through the system. It’s been difficult to administer, both with the vendors, and I know it’s been tough at times for the industry. But that keeps us confident that we’re doing everything we can to prevent illegal product from coming in or product being diverted out of state.”

Can the same be said today?

The traceability issue may be the biggest problem, but there are many other subjects that need closer inspection.

Last month, Marijuana Venture published an article about the lack of mandated pesticide testing in Washington — a definite public health concern, of which I believe the average consumer is largely unaware. They trust the products on the shelves of cannabis retailers are safe — no different than they’d trust the products at a local supermarket. In starting its own pesticide testing regimen, Uncle Ike’s, a Seattle-based chain of pot shops, exposed several flaws in the “just trust us” approach to pesticide testing, as well as additional concerns in the traceability system. At the latest, the Liquor and Cannabis Board knew in 2016 about illegal pesticide use among cannabis growers; the state fined two companies for using banned pesticides, but generally avoided taking further action.

In February, a bipartisan group of 10 state lawmakers wrote a letter to Governor Jay Inslee expressing concerns about the “toxic culture” of the Liquor and Cannabis Board and urging the governor to rescind his nomination of board member Russ Hauge. According to an article in The Stranger, the lawmakers said Hauge was “either ignorant of the facts, or purposely did not tell the truth” at a legislative committee hearing in February, but did not specify the facts they believed were misrepresented.

Inslee defended his nomination of Hauge. Garza defended his agency and placed the blame squarely on licensees having problems with violations. He said the Liquor and Cannabis Board would hire an independent consultant to look into the matter.

I, for one, will be watching intently to see what the independent consultant finds — especially to see if it lines up with what I’ve been hearing from licensees for years. Many business owners and managers in Washington are concerned about speaking publicly for fear of retribution. Think about that for a minute. This isn’t the inner-workings of the Mafia, where people might be justifiably concerned about “payback.” We’re talking about state regulators, not a bunch of leg-breakers. State regulators cannot build trust and transparency if there can’t be an open dialogue about problems and solutions.

As the legalization trend ignited by Colorado and Washington voters in 2012 spreads across the country, the two pioneering states appear to be headed in opposite directions. A few months back I spoke with a prominent Colorado cannabis business owner who said things had been relatively smooth for more than a year. He said the latest upheaval (a term I use with no shortage of sarcasm) was about the shape of the warning sign required on packaged products containing THC. Should it be a circle? A square? Maybe a triangle?

This conversation happened just days after the Washington State Liquor and Cannabis Board announced it was considering a ban on all infused candies — a major change that would potentially force Washington businesses to shutter, overhaul their business models or spend significant money retooling product lines. The merits of a candy ban warrant an in-depth discussion (I’m personally torn on the issue, as I certainly oppose products targeted toward children, but believe that distinction is a difficult line to walk and adults should generally be trusted to be responsible). However, this proposal seemed to come out of nowhere, without significant supporting evidence to show a rule change was necessary.

There may be bigger flaws within Colorado’s regulatory framework that need to be addressed at some point, but for now business owners and managers feel comfortable that the state won’t completely upend their entire operations. The state seems to understand the symbiotic relationship it has with the cannabis industry, which sustains thousands of jobs and generates hundreds of millions of dollars in tax revenue. Operators are allowed to focus on growth and building a successful business, both within Colorado and in emerging markets throughout the U.S.

As one of the first states to adopt adult-use legalization, Washington could — and should — be a leader in numerous cannabis-related areas, including social-use clubs, delivery services, medical marijuana research, criminal-record expungements, sustainability, promoting diversity within the industry, establishing cannabis testing standards, etc.

Instead, state officials are caught up in the constant need to tweak and alter existing regulations — with or without sufficient justification — preventing business owners from having a stable platform from which to build their companies.

I could write volumes about what I see as flaws in Washington’s regulatory framework, but most of these “flaws” are a matter of opinion. There are just some rules that are dumb, not systemically broken. For example, I think it’s asinine that state-licensed retailers are limited to selling marijuana and marijuana-related paraphernalia. There’s no justifiable reason for preventing cannabis shops from selling branded apparel and magazines, as well as non-infused snacks and non-alcoholic beverages (both of which pair well with legal weed).

Washington had the opportunity — if not the obligation — to be a beacon for legalization throughout the United States: This is what legalization looks like; this is why it’s better for society than prohibition; this is why it benefits the state’s economy.

The Evergreen State can still be a leader in the cannabis space.

But it might need to take cues from other states first.

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