The Washington State Legislature’s 2020 regular session is proceeding, and we will be covering bills as they develop. You can see Part 1 here and Part 2 here. Wednesday, February 19 was the house of origin cutoff, meaning generally that bills need to have passed out of their house of origin (House or Senate) in order to advance further this session. Most bills that become law meet the deadline, but some exceptions permit otherwise dead bills to advance.

Some Important Updates

HB 1974, (discussed in Part 2) which would establish a cannabis commission, was reintroduced into the House Appropriations Committee, passed (as a 2nd substitute bill) out of the committee and was referred to the Rules Committee. Stakeholders have indicated to us that the bill is unlikely to advance any further.

HB 2826, (also discussed in Part 2) which would clarify the Washington State Liquor and Cannabis Board’s (“WSLCB”) authority to regulate marijuana vapor products, was passed out of committee and passed on a full House vote nearly unanimously. It is now being considered in the Senate, where a hearing has been scheduled in the Senate Committee on Labor & Commerce.

Additionally, stakeholders have indicated that each the bills discussed in Part 1 are unlikely to advance. Those were HB 2361, which concerned industry workplace standards (often called the union bill), and HB 2263 / SB 6085, which would have removed the residency requirement and would have established a marijuana equity loan program.

HB 2870 – Allow additional marijuana retail licenses for social equity purposes

HB 2870 seeks to address inequity in the current cannabis industry “for individuals and communities most adversely impacted by the enforcement cannabis-related laws.” (We had reported on another social equity bill in Part 1, HB 2263, and that bill appears to have died.) HB 2870 was actually requested by the WSLCB and quickly made its way through three committees before passing out of the House. It is now being considered in the Senate, where a hearing has been scheduled in the Senate Committee on Labor & Commerce.

HB 2870 allows the WSLCB to issue (or reissue) new marijuana retail licenses that have been previously canceled for various reasons. WSLCB currently has 13 licenses that are available to be issued. These licenses would be issued only to “social equity applicants” who submit a “social equity plan.” A social equity applicant means:

(i) An applicant who has at least fifty-one percent ownership and control by one or more individuals who have resided for at least five of the preceding ten years in a disproportionately impacted area; or

(ii) An applicant who has at least fifty-one percent ownership and control by at least one individual who has been convicted of a marijuana offense or is a family member of such an individual.

The definition of “social equity plan” is longer but means a plan that addresses some of the intent of the bill, which is to ameliorate some of the harms done to neighborhoods that were disproportionately affected by the criminal justice system, particularly as a result of marijuana criminal offenses.

The fiscal note for HB 2870 shows that it would generate nearly $10 million in tax revenue for the state.

If passed, this bill would be the first legislative or administrative effort made in Washington to address the harms done by the War on Drugs, which preceded marijuana legalization.

SB 6057 – Concerning price differentials in the sale of marijuana

SB 6057 allows for price differentials in the sales of marijuana, either in longer-term contracts between licensees or in single transactions. Currently, WAC 314-55-018 prohibits such activities, as it states, “No industry member or licensee shall enter into any agreement which causes undue influence over another licensee or industry member.” The WSLCB essentially interprets that to mean no preferential treatment, and any differences in the pricing of products may indicate to the WSLCB “undue influence.” Under the bill, reasons for price differentials could include (but is not limited to) competitive conditions, costs of servicing a retailer, and the quantity purchased. Current WSLCB interpretation is in line with so-called tied house laws which are common in the alcohol industry.  SB 6057 would move away from tied house pricing restrictions and provide marketplace participants additional pricing options.

SB 6057 has passed out of the Senate and has been referred to the House.

SB 6206 – Creating a certificate of compliance for marijuana business premises that meet the statutory qualifications at the time of application

SB 6206 amends existing law and creates a certificate of compliance that the WSLCB must issue to marijuana businesses if the license application meets statutory requirements on the date of the application. Though not obvious by the bill’s text, the intended effect of this bill is to ameliorate activities by competitors that could result in a business being shut down for being non-compliant.

Senator Ann Rivers, the Republican whip who is known for her involvement in cannabis legislation, spoke on the need for this legislation:

[I]t has become common practice for competitors to prevent other businesses from entering into a place by throwing up a storefront, if you will, for a child care center or some other type of premise that prevents someone from actually opening a store that they have been going through the permitting for….  [A] cannabis store owner may spend millions of dollars to open a business only to have it shut down at the very last second.

These three bills have all passed out of their houses of origin and will be considered by the other half of the legislature. They have therefore advanced far more than most bills ever do, though that does not mean they are destined to become law. Stay tuned for more updates.