By The Herald Editorial Board
It will not be a surprise to many that the transformation of a black-market product — and we’re talking marijuana here — into a legal and accepted retail good would take a while to navigate numerous regulatory challenges, certainly more than changing the name of Washington state’s regulatory agency from the Liquor Control Board to the Liquor and Cannabis Board.
At least the acronym stayed the same.
Now nearing a decade since Washington voters approved the initiative in 2012 that made possession of recreational marijuana legal as of 2013 and allowed for legal production, processing and retail sales as of 2014, the industry has grown to support scores of businesses, thousands of employees and has provided millions in revenue to state coffers in excise taxes and license fees.
In revenue alone, the industry-wide figure has grown from nearly $67.5 million dollars in its first year in 2014 to projected revenue for the 2021-23 biennium of $541.2 million, according to figures from the Washington Cannabusiness Association. Compare that to the $327 million in tax revenue from the sale of spirits in Washington state in 2020.
Still building its reputation: Even with the economic pluses it offers through the creation of jobs and support of small businesses and the significant boost in tax revenue, the industry still has work cut out for it in legitimizing its reputation with the general public — especially those who aren’t cannabis users — and even with the state’s regulators.
The industry, as expressed during a recent Zoom media briefing, recognizes the advantage that the state’s regulation provides as growers, processors and retail shops seek to show the industry offers a safe legal product and is committed to keeping cannabis products out of the hands of children and adults under 21 years of age, said Vicki Christophersen, executive director for the Washington Cannabusiness Association, which represents growers, processors and retail shops.
Christophersen outlined several regulatory challenges that the industry faces, even after nearly a decade since the state became one of the first to legalize retail sales of recreational marijuana.
Quality control testing absent: Chief among those challenges, she said, is a lack of quality control testing for cannabis, specifically for pesticides and heavy metals. State law prohibits both, but as yet, Washington is the only state with a legal cannabis marketplace that doesn’t mandate quality control testing.
The dangers that lack of testing allowed were clear during 2019’s nationwide vaping scare, when a rash of pneumonia-like illnesses were reported among mostly young e-cigarette users. Eventually the illnesses were linked to vitamin E acetate, an oil-like substances that was used in cannabis vaping solutions.
“We really believe that central to our being able to prove ourselves — that we are a safe marketplace, that we are providing a safe product — is having quality control testing,” Christophersen said. “We hope the LCB can focus on getting that done.”
Rule-making on testing has now been ongoing for four years, she said.
It’s not that issues haven’t advanced among state and national lawmakers and state and federal regulators, but the progress has been slow and not always without falling back into old habits.
The state Legislature, in 2018, passed reforms that sought to scale back the enforcement fervor at the LCB that was threatening the licenses of growers and processors over relatively minor violations, such as smudged tags and “clerical errors” in labeling of marijuana plants. The reforms went into effect in 2019, but Christophersen said, one business with some 200 employees still faces the loss of its license, even after it agreed to fines and changes negotiated with an LCB attorney.
And some decisions by LCB staff and officials can still seem arbitrary.
It can be a long and difficult process to get approval for product packaging, Christophersen said, even after recommended changes are made, only to see the label rejected again.
Tempest in a mason jar: In one case she described, glass mason-jar style packaging for one business’ product was rejected, after its initial approval in 2015, because the mason jar had a handle, allowing its use as a drinking glass. No explanation was given, she said, as to why a mason jar with a handle was a health or safety concern.
“We want to be at a place where these types of issues aren’t what we’re focusing on. Instead we want to focus on how to provide a safe marketplace and important revenue,” Christophersen said.
Among issues the industry wants to see addressed include allowing the smallest producers to expand square-footage limits for growing of marijuana; improving the state’s seed-to-sale tracking; reviewing recent innovations in production of products derived from hemp, such as CBD and a THC product that produces less of a high and is useful to medical patients; and relaxing background check requirements that would allow employees who have past convictions for misdemeanors and nonviolent felonies.
Some of this up to state lawmakers, while other issues are in the LCB’s purview.
Cash only: Congress, as well, needs to move on what’s called the SAFE Banking Act.
While legalized for recreational or medical use in more than 30 states, marijuana remains illegal under federal law, which means that banks — even in states where it’s legal and licensed — must reject the business of those in the cannabis industry out of fear they could be prosecuted under federal money-laundering laws.
That’s left growers, processors and retailers to operate on a cash-only basis that can leave them a target for criminals and poses a threat to employees who have to handle large amounts of cash. It also complicates state efforts to track revenues for taxes and compliance with regulations.
The act would shield financial institutions from those federal rules and allow them to do business with the cannabis industry, offering a range of services, including the use of credit and debit cards at retail locations, the use of checking and savings accounts, access to credit and loans and employee payroll services. This should also provide relief to those businesses that provide goods and services to those in the marijuana industry.
In those states were voters and lawmakers have determined to make cannabis a legal part of the business community, those employers should be able to take advantage of the banking services available to any other business.
Giving voters what they wanted: There remain concerns about the increasing potency of some marijuana products, but Washington voters made the determination that the best way to ensure safety, discourage the illicit market and keep cannabis products out of the hands of minors was to provide a well-regulated and transparent marketplace.
It’s a rare industry that recognizes the value that regulation has to its core business; the state’s cannabis industry needs effective regulation that is focused on the most important issues.
Nearly a decade since legalization, marijuana still faces a challenge with its image, and maybe always will.
“The assumption is that we must be doing something nefarious,” Christophersen said, “because it’s cannabis and not beer.”
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